Published: Sun, January 13, 2019
Markets | By Jeffery Armstrong

Powell repeats pledge to remain 'patient' with rate hikes

Powell repeats pledge to remain 'patient' with rate hikes

Since then, stock markets endured a topsy-turvy end to the year as the US government shut down and global trade tensions ratcheted higher.

The Fed raised the federal funds rate four times in 2018.

Powell on Thursday also reiterated that, separate from what happens with interest rates, the Fed would continue allowing its almost $4 trillion portfolio of bonds to shrink each month, to a level "substantially smaller" than it is now.

The FTSE 100 is on track for its best week in three months after global stocks were lifted by reassurances from the US Federal Reserve that it could be patient about interest rate rises. However, many economists believe the Fed may end up raising rates only once in 2019, and that solo rate hike may not occur until the middle of the year.

Following a bout of heightened volatility in financial markets in recent weeks, central bankers are now taking pains to assure investors that they aren't in a hurry to lift rates further.

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Various factors that could pose downside risks for domestic economic growth and inflation were mentioned, including the possibilities of a sharper-than-expected slowdown in global economic growth, a more rapid waning of fiscal stimulus, an escalation in trade tensions, a further tightening of financial conditions, or greater-than-anticipated negative effects from the monetary policy tightening to date.

Part of that message is meant to downplay the significance of the policy projections that officials issue every three months.

Financial markets were not pleased, and stocks falling sharply.

It seems that "patience" is the recurring theme in Federal Reserve lexicon as of late with Fed Vice Chairman Richard Clarida echoing the same on Thursday.

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Despite his largely upbeat view on the United States economy, and clear signals the Fed will be patient about raising interest rates any higher - statements that helped equities to recovery - markets focused on those two words.

"There is no pre-set path for policy", Powell said in his Atlanta comments, which helped to send the market up by 746 points last Friday.

Fed Chairman Jerome Powell also sought to reassure financial markets last week, saying policymakers would be "patient" before making any further moves as they watched to see how the economy evolved, and could react quickly to any changes.

The minutes made no reference to any of the attacks President Donald Trump has leveled at Powell and the Fed for the series of rate hikes, which Trump has blamed for pushing the stock market down.

US and Chinese officials are working on arrangements for higher-level trade talks after mid-level officials this week discussed USA demands on issues that would require structural change in China to address issues such as IP theft, forced technology transfers and other non-tariff barriers.

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