It looks like Jay Powell is blinking in his battle with President Trump over rate hikes — and Wall Street is cheering.
The Federal Reserve chairman said Wednesday interest rates are “just below” their neutral level — suggesting that the Fed will not have to aggressively raise rates to tamp down an overheating US economy.
That’s a big shift from early last month, when Powell rattled markets by saying the central bank is “a long way” from getting rates to a neutral zone, where they’re neither speeding up nor slowing down the economy.
The Dow Jones industrial average — which had been up roughly 190 points before Powell’s remarks were released — quickly soared by more than 450 points, or 1.7 percent, well above the 25,100 mark.
The S&P 500 and Nasdaq were up 1.4 percent and 1.7 percent, respectively.
The US economy is expected to proceed on its path of “continued solid growth,” Powell said Wednesday at an event in New York City.
“My own assessment is that, while risks are above normal in some areas and below normal in others, overall financial stability vulnerabilities are at a moderate level,” he said.
Powell’s remarks come one day after Trump said he regretted appointing him to the top post.
“I’m not even a little bit happy with my selection of Jay [Powell for Federal Reserve Board chair]. Not even a little bit,” Trump said in an interview with the Washington Post.
The Fed has raised rates three times this year, with a fourth rate hike expected next month.
Trump has said these hikes have slowed the progress his administration has made in trying to revitalize the economy, which had been growing around a sluggish 2 percent a year before he took office.
The Fed is expected to raise rates again