Today is Wednesday 28th November 2018 and we are commenting on the FED Chairman’s remarks today that may lead to fewer interest rate rises ahead.
Wall Street shares have risen sharply after the US central bank indicated there may not be as many future interest rate rises.
Federal Reserve Chair Jerome Powell said today at the Economic Club in New York, that interest rates are “just below” a neutral level that neither hastens nor slows growth whereas last month he said the bank had a “long way” to go before reaching that level.
He certainly appeared to soften his tone about future rate rises while continuing to defend the Fed’s plans for gradual increases.
“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy – that is, neither speeding up nor slowing down growth…….. there is no preset policy path. We will be paying very close attention to what incoming economic and financial data are telling us.”
There is no doubt that the US has experienced quite healthy GDP figures this year and a continuing decline in unemployment, partly as a result of increased Government spending and the much heralded tax cut. However, many economists expect that pace to slow next year as the effects of the stimulus fade.
President Trump has blamed the Fed’s rate rises for recent stock market declines and has described future rate increases as the biggest risk to the US economy and also indicated he was not too happy with his pick for FED Chairman.
We can’t help but think that this may have had a slight impact on Powell’s announcement today, however we still believe that a rate rise in December is still possible and it may be next year that rates may be tempered.
Meanwhile gold jumped almost $10 on the news and silver jumped 20 cents with gold currently standing at $1221 and silver $14.32.
The DOW is up over 600 points, the S&P up 61 points and the dollar index is down .5 but is still standing at 96.8.
We shall see tomorrow how markets digest the news overnight, but what is clear for the moment is that this will be more bullish for stocks as witnessed by the DOW’s rise – however we must not forget that underlying these comments is the thought that perhaps next year, the economy may not be as strong as it has been this year and that point should not be ignored.
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