Powell Comments Suggest Fewer Rate Hikes Next Year

Global markets stocks gain dollar sags on dovish-sounding Fed

The Dow Jones Industrial Average surged more than 600 points, or 2.5%, to 25,366.43, while the broader S&P 500 index rose 2.28% to 2,743.43.

There wasn't much of a reaction in the financial markets on Thursday to the minutes from the Fed's early November meeting.

Powell's comments and similar remarks from other Fed officials have raised hopes in financial markets that the central bank may be close to slowing its rate increases, which have gradually raised borrowing costs for consumers and businesses.

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.

Equity investors reacted favorably to the comments by Powell, who indicated there may not be as many future interest rate hikes from the central bank as was initially anticipated.

Nevertheless, it is a tricky concept: Economists put the range between 2.5 per cent and 3.5 per cent.

Oil slipped below $60 a barrel, continuing a recent run of losses, after USA crude inventories rose for the 10th week in a row and investors anxious about whether OPEC-led producing countries would reach an accord next week on output cuts. "I think that was what really sparked the market to go higher". "This was again on display today", RBC Capital Markets chief US economist Tom Porcelli wrote in a note. His remarks Wednesday appeared to suggest to this audience that he might stop sooner or move more slowly. "All he is doing is pointing out an obvious idea", Porcelli wrote in a client note.

"Powell's comments suggest that 2019 may be more of a wait-and-see approach and the assumption of any hikes may be premature", said Tai Wong, head of metals trading at BMO.

7.0 magnitude quake rocks Alaska in US
There was minimal structural damage Friday to Anchorage buildings, though some major roadways will need significant repairs. But once we realized we had to get under the desks and it kept going, people got scared. "Just broken glass everywhere".

On Wednesday, Powell also emphasised these uncertainties. Why should he? The data for the U.S. economy remains strong.

"Should significant problems arise in China or in EMEs more broadly, spillovers, including dollar appreciation, declines in world trade and commodity prices, and a pullback from risk-taking by investors outside the affected markets, could be sizable", said the Fed in its report.

"The neutral rate is an absurd concept". Then: Home sales have fallen to their slowest pace in two years, and low inventory in the housing market isn't helping. We also know that moving too slowly - keeping interest rates too low for too long - could risk other distortions in the form of higher inflation or destabilising financial imbalances.

Stock markets turned higher after release of the Fed minutes, continuing a rally begun on Wednesday when Fed chair Jerome Powell seemed to signal a possible shift in tone.

The minutes did raise a number of worries about Trump's get-tough trade policies, which have levied tariffs on billions of dollars worth of imports from China and other countries and prompted retaliation against US products.

But from there, paths diverge.

And any signs of an increase continued to be met by vituperation from President Donald Trump, who has denounced the current tightening cycle at the Fed, which Congress made independent of the White House.

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