It is no secret that the Federal Reserve has continued to raise interest rates. What has been up for debate in recent months is whether the Fed wants to keep raising rates to the point that it helps to wreck the economic growth story. Some Fed events and speeches are worth covering more than others, and that was definitely the case on Friday.
Fed Chair Jerome Powell spoke during a panel with former Fed Chairs Janet Yellen and Ben Bernanke in Atlanta on Friday, January 4, 2018. After waves of criticism, including harsh words from President Donald Trump, it looks as though Powell finally has absorbed the recent stock market volatility, falling bond yields, key warnings from corporate America and weaker economic reports.
With a median target of two rate hikes expected in 2019, Powell made three key points that were responsible for the second leg higher of Friday’s huge stock market gains.
He suggested flexibility on interest rates this year and that the Fed was not on a fixed path to keep raising interest rates. This may be the key driver, even if Powell’s hawkishness has been far more muted of late than prior to December. Investors should not take this to mean that all rate hikes are hereby on hold, but they are interpreting this as a signal that the rate hikes are far closer to ending, rather than continuing endlessly based on historical “neutral rate” levels.
Another point is that Powell said he would not resign if the president asked him to. This is after the president was openly vocal about his displeasure with Powell’s interest rate hikes and the dwindling down of the Fed’s balance sheet. It remains unclear if a president can even “unseat” a Federal Reserve chair. Powell also has suggested that the