It’s difficult to take Jerome Powell’s jawboning about an independent Fed unaffected by either Trump’s ongoing verbal assault or the markets’ recent declines when he supposedly, suddenly, sees an entirely different economic reality than he did two months ago.
Fed Chair Powell says gradual rate path is designed to balance risks from CNBC.
via CNBC:
- Fed Chairman Jerome Powell said Wednesday that the central bank’s benchmark interest rate is “just below” neutral.
- The chairman’s observation on rates in early October helped set off a rough period on Wall Street, after he said the Fed was “a long way” from neutral.
- Powell also has faced criticism from President Donald Trump about rate hikes.
Federal Reserve Chairman Jerome Powell said Wednesday he considers the central bank’s benchmark interest rate to be near a neutral level, an important distinction from remarks he made less than two months ago.
“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,” Powell told The Economic Club of New York in a speech being closely watched in what has become a volatile financial marketplace.
The chairman’s observation on rates in early October helped set off a rough period on Wall Street, after he said the Fed was “a long way” from neutral. Major averages dipped briefly into a 10 percent correction and worries grew that more rate hikes might meaningfully slow down the strong economic growth of the past two years.
Fed: Risk Assets Susceptible to “Particularly Large Plunge” if Present Risks Materialize
“An escalation in trade tensions, geopolitical uncertainty, or other adverse shocks could lead to a decline in investor appetite for risks in general. The resulting drop in asset prices might be particularly large, given that valuations appear elevated relative to historical levels.”
Trump & Powell got spooked by this chart-> pic.twitter.com/GuYMk0UxMc
— Alastair Williamson (@StockBoardAsset) November 28, 2018
The biggest mistake that investors can make is to believe that if Fed delays rate hikes it will be a buying opportunity.
If you think investment, consumption or credit will soar, think again.
The message that action would convey is “the economy is in much worse shape, run away” t.co/q81MDTqiDs
— Daniel Lacalle (@dlacalle_IA) November 28, 2018
“INTEREST RATES ARE JUST BELOW NEUTRAL”
Algos and permabulls hear: “free money, BUY”
Smart people hear: “the Fed just admitted he economy is in BIG trouble, the markets will figure it out soon”
Smarter people hear: “interest rates aren’t neutral, they’re still NEGATIVE, the
— OW🎄 (@OccupyWisdom) November 28, 2018
Life comes at you fast pic.twitter.com/NhfNN4gyYY
— OW🎄 (@OccupyWisdom) November 28, 2018
US New Home Sales Fall Off the Table in October: Biggest Drop Since April 2011
“Following the small MoM blip higher in existing home sales (though dismal YoY plunge), new home sales were expected to rebound in October (after plunging 5.5% M-o-M in September) but instead they utterly collapsed – crashing 8.9% M-o-M.”