Stocks surge on hint of slower rate hikes

President Trump Says the Federal Reserve Is a 'Much Bigger Problem Than China'

Report: Trump Says 'Not Even a Little Bit Happy' with Fed's Powell

Federal Reserve Chair Jerome Powell boosted USA stock markets on Wednesday when he said the policy rate is now "just below" estimates of a level that neither brakes nor boosts a healthy economy, comments that many took as signalling the Fed's three-year tightening cycle is drawing to a close.

Trump on Tuesday again blasted his hand-picked chief of the U.S. central bank, saying he was "not even a little bit happy" with his selection of Powell. "Not even a little bit".

The chairman also suggested that interest rates appear to be just below the level the Fed calls "neutral", where they are thought to neither stimulate growth nor impede it. There is speculation Powell could have listened to Mnuchin's suggestions and could ramp-up the reductions of the central bank's holdings of USA debt now at just above four trillion dollars.

But higher interest rates tend to slow economic growth, and since growth in the US and other regions is already likely to slow down next year, investors are concerned the increases will hinder the economy. In an interview with The Washington Post, Trump criticized higher interest rates and other Fed policies.

As reported by the Washington Post, Trump once upon a time was considering Fed Chair during the Obama administration Janet Yellen to keep the post that Powell now holds.

"The question for financial stability is whether elevated business bankruptcies and outsized losses would risk undermining" financial stability, Powell said at the Economic Club of NY. They have penciled in another rate increase by year-end and three more in 2019, according to quarterly projections from September that will be updated next month. "I think he looks past that, but I don't think he looks past the potential effects of a further decline in the stock market", he added.

And, when presidents do criticise the Fed, they only tend to do it once they have left office. In the question-and-answer period following his speech, the Fed chairman agreed with the consensus view that monetary policy's goals should remain focused on low unemployment and stable inflation rather than targeting financial markets such as stocks.

By saying rates were slightly lower than the level he perceives as "neutral, " Powell's statement appears to be suggesting at least one more interest rate increase is coming in the near future.

But in discussing his choice of Powell a year ago, Trump said Tuesday: "Look, I took recommendations". The far bigger impediment to growth next year will be the fading of any stimulus from the massive tax cuts Mr. Trump enacted in late 2017, he predicted. We also know that moving too slowly - keeping interest rates too low for too long - could risk other distortions in the form of higher inflation or destabilizing financial imbalances.

As disturbing is that Mr Trump is not alone in this behaviour.

On Wednesday, Steve Keen, the author of "Debunking Economics" and the world's first crowdfunded economist, joined Radio Sputnik's Loud & Clear to discuss the the Federal Reserve's interest rate hikes. But many economists warn that the attacks actually could pressure the central bank to raise rates to demonstrate its independence from political influence.

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