Did Jay Powell's Rate Hike Kill The President?

Federal Reserve raises interest rates, signals fewer hikes ahead

Federal Reserve raises interest rates, signals fewer hikes ahead

Defense contractors fell after President Donald Trump said he's withdrawing USA soldiers from Syria in an unexpected move. Meanwhile, Powell, like his predecessors, has had his stumbles, confounding markets in recent weeks by implying rates would rise fast, then having to dial that back.

President Donald Trump has begun polling advisers about whether he has the legal authority to fire Federal Reserve chairman Jerome Powell, according to two people familiar with the matter. But investors' concerns over the chairman's comments led to USA equities to record their steepest declines for any Federal Open Market Committee announcement day since 2011.

At the same time, Powell tried to make clear the Fed would not blindly pursue its effort to normalize borrowing costs at the risk of inadvertently triggering a recession.

"I think the run-off of the balance sheet has been smooth and has served its objective, and I don't see us changing that", Powell told reporters after the Fed raised its Federal funds rate to a range of between 2.25 per cent to 2.5 per cent.

"There's significant uncertainty about the - both the path and the ultimate destination of any further rate increases", Powell said, adding that low inflation "gives the committee the ability to be patient in moving forward".

"This is primarily just a follow-through from yesterday's selling", said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

But like anyone seeking a compromise, Powell ended up making few people happy.

Investors had hoped for a less aggressive approach amid concern that global growth is slowing, while Powell played down the impact of recent market turmoil on the U.S. economy.

Investors registered their displeasure with the Fed's tightrope-walking by sending stocks sharply lower.

On Wall Street, The Dow Jones fell 386.68 points, or 1.63 per cent, to 23,288.96, the S&P 500 fell 34.8 points, or 1.37 per cent, to 2511.36 and the Nasdaq Composite shed 161.74 points, or 2.38 per cent, to 6622.18.

The S&P 500 index was down about 1.6 per cent in late afternoon trading.

LeBron James: NFL owners hold 'slave mentality' toward players
The difference between the National Football League and NBA according to LeBron James; the level of respect shown to the players. He claimed he would "absolutely love" to team up with the MVP candidate.

All three major indexes are down more than 12% in December.

Stocks are now headed for their single worst month since October 2008, when the market was being battered by the global financial crisis.

There was a lot of information released by the Fed for investors to digest.

So score one for the central bank's "lower for longer" strategy of keeping rates pinned down, its steady guidance that any increases would be ploddingly slow, and arguably its massive balance sheet that anchored home mortgage and other important longer-term rates.

The US central bank's view that the economy is strong will be tested amid a slew of economic data, including third-quarter GDP and November consumer spending, the Fed's preferred measure of inflation. The yield on the 10-year Treasury note dipped to 2.78 percent from 2.79 percent.

The US central bank moved to lift the federal funds rate, the technical tool the Fed can to tinker with through open market operations, from 2.25 percent to 2.50 percent.

The central bank has raised rates with steady regularity as the United States economy has strengthened. Its updated forecast projects two rate hikes next year, down from three predicted in September.

Gregory Daco, chief US economist at Oxford Economics, told the Associated Press that he thinks the underlying fundamentals for growth remain strong and that the expansion will continue.

And Powell is acknowledging that forecasting rate hikes has become tougher in this environment.

Dow e-minis were down 0.46 percent and Nasdaq 100 e-minis were down 0.73 percent.

"The Fed behaving in a very prudent, balanced way increases the possibility of a very balanced expansion" continuing, he said.

Recommended News

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.