Saturday , June 3 2023

Rally after Powell says rates & # 39; the Fed interest almost & # 39; neutral & # 39;


The chairman of the Federal Reserve stated that US interest rates are close in & # 39; "neutral level", leading to ralwaqt the stock market as investors interpreted the comments as a sign that the central bank is preparing a program to reduce the growing rate.

While he defended the recent gradual increase of the Fed, Jay Powell said the central bank will see new economic data very closely as makers of monetary policy deciding x & # 39; to do next.

The rates are declining estimates "just" under neutral – the level that cause growth to accelerate or decrease – the chairman of the Fed said, b & # 39; possible sign makers politics may decide not & # 39; have not much they upload them.

"M & # 39; there is no path & # 39; predetermined policy", said Mr Powell. "It will look much at what you are telling us the financial and economic data next".

The comments at the Economic Club of & # 39; New York on Wednesday came when faced intensifying pressure from the White House to refrain from further increases in rates. President Donald Trump this week told Washington Post Fed, which next month is expected to bear & # 39; rates for the fourth & # 39; once this year, "he & # 39; away from what they are doing".

Mr. Trump added: "S & # 39; now, even a little happy with my choice & # 39; Jay."

The markets reacted in & # 39; blow to the comments of Mr. Powell, who contested with & # 39; evaluation gave last month. At the beginning of & # 39; in October, he said that rates were "a long way" neutral levels, which led to selling as investors fretted that the Fed was preparing for a long succession of & # 39; increases in rates.

The S & P 500 rose 1.6 percent in afternoon business & # 39; New York, a full percentage point gap after the speech by Mr Powell. The Dow Jones Industrial Average extended its gains to trade 1.9 percent higher and the Nasdaq Composite rose 1.9 percent.

The government bonds rallied again because the harvest has become lower. The yield on the point & # 39; Reference Treasury of the United States & # 39; 10 years decreased by & # 39; 0.7 basis points to 3.0498 percent, which was up 1.1 bp spoke before Mr Powell. The yield on the note & # 39; two most sensitive policy was & # 39; 2.4bp f & # 39; 2.8066 percent.

In his speech, Mr. Powell did not refer directly to Mr Trump criticisms. But he insisted that the Fed was right to begin the gradual rate & # 39; increases having judged the economy was no longer being well served by extraordinarily low rates that have prevailed following the financial crisis -2008.

"The rates of & # 39; interest still low by historical standards, and remain just below the widest range of & # 39; estimates of the level to be neutral to the economy, ie neither speeding nor reduce growth", said Powell. "My FOMC colleagues and I, as well as many private sector economists are forecasting continued solid growth, low unemployment and inflation close to 2 percent."

The slow pace of & # 39; increases in the Fed rate was an exercise to balance two risks, Mr Powell added.

"Move b & # 39; rapid rate risk is diminishing expansion", he said. "We know also that moving too slow – keeping interest rates low for too long – you & # 39; risk further distortions in the form of & # 39; higher inflation or destabilizing financial imbalances."

The speech comes after the release of the new Financial Stability Report of the Fed. He said that overall debt in the financial system was "abnormal or excessive". Even if some asset valuations were high, the Fed did not see "dangerous excesses" in the stock market.

The Fed chairman also offered a thorough overview of the financial market risks, and said that while those policymakers were keeping in & # 39; minds areas including an increase in corporate debt, the general system was resilient. The end of the financial health checks Fed suggested that "all things are considered to have good health", said Mr Powell.

The main area for concern was corporate lending, where firms with high debt burdens and & # 39; interest were more to boost their lending, and underwriting measures & # 39; loans & # 39; quality was deteriorating.

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