Sunday, 20 January, 2019


Powell says he would not resign as Fed chair if Trump asked

US stocks rally after strong jobs data, dovish Fed comments 'No' Jerome Powell won't resign
Patty Aguilar | 07 January, 2019, 07:23

U.S. President Donald Trump has called the Fed's rate hikes a mistake and said he was not happy with Powell. The stock market has seen stomach-churning declines since October, a development that Trump has blamed on the Fed's continued rate hikes, although the president's trade dispute with China as well as concerns about global economic growth also played a part in the market volatility.

Powell "said exactly what the markets wanted to hear", said Gregori Volokhine of Meeschaert Financial Services.

Analysts predicted that job reports for January and February will be more of a policy reference for the Fed than the December report as they would provide a clearer picture of how tightened financial conditions affect the USA economy.

Employment data showed the U.S. added 312,000 jobs in December, much above analyst expectations, strengthening the case of those who have argued that markets have overreacted to signs that USA growth may have peaked.

Stocks have been pressured since mid-December when the Fed raised its benchmark interest rate a quarter-point while issuing a somewhat-hawkish statement despite lowering its rate hike projections from three to two. "Powell's change in tone is appropriate and we expect a similar, more cautious tone to continue in light of increased uncertainties".

Powell's remarks reassured investors who have anxious the Fed might raise rates excessively, but Jason Schenker of Prestige Economics suggested the Fed could.

The Dow Jones Industrial Average surged almost 750 points Friday, more than erasing its losses one day earlier, as a stock market hungry for good news received two morsels: a stronger-than-expected jobs report and comments from the Federal Reserve Chairman that signaled more flexibility in raising interest rates.

"The markets are pricing in downside risks. and they are obviously well ahead of the data, particularly if you look at this morning's labor market data", Powell said. "I think that they're signaling a pause".

"The markets are feeling better that the Fed is not strangling the overall economy and perhaps forcing it into a recession, and that removes a monetary policy concern that has been hanging over the market for the past few months", said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC.

"If we ever came to the conclusion that any aspect of our plans was somehow interfering with our attainment of our statutory goals, we wouldn't hesitate to change it, and that would include the balance sheet, " he said. Asked on Friday whether he would resign if Trump requested it, Powell said: "No", adding there were no meetings scheduled between the two men. The remarks were received as more dovish than some of Powell's recent comments, which have drawn the ire of President Trump.

This story has been published from a wire agency feed without modifications to the text.

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