Powell Comments Suggest Fewer Rate Hikes Next Year

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Image: TimArbaev iStock

There might be fewer interest rate hikes in 2019.

Federal Reserve chairman Jerome Powell said on Wednesday that the central bank’s key benchmark interest rate is near the neutral rate, which is an important distinction from his message in October about the neutral rate being far away. 

When interest rates are neutral, the economy is on a sustainable path. Deviations from neutrality can cause booms and busts.

The Dow was up by more than 500 points. The two-year Treasury yield—most reflective of the Fed rate policy—fell to 2.79% after an earlier high of 2.85%.

While the Fed is expected to raise rates by a quarter point at its meeting on Dec 19, it has forecast to have three more hikes next year.

US President Donald Trump has repeatedly slammed the Fed chair for raising rates too often.

Late last month he said he was very unhappy with the Fed because Obama had zero interest rates while he “maybe regrets nominating him to become the Fed chair.”

In an interview with the Washington Post earlier this week, Trump blamed the Fed for recent stock market declines and General Motors’s announcement of plant closures and layoffs.

 “I’m doing deals, and I’m not being accommodated by the Fed,” Trump was cited as saying in a Washington Post report based on the interview. “[The Fed’s] making a mistake because I have a gut, and my gut tells me more sometimes than anybody else’s brain can ever tell me.”

“So far, I’m not even a little bit happy with my selection of Jay. Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing,” he was quoted as saying in the report.