Jerome Powell defended the process of normalization of the monetary policy followed until now by the Federal Reserve in the united States, in full escalation of the criticisms of his strategy on the part of Donald Trump. In recent weeks, the republican president has launched harsh and abrasive criticism against the monetary strategy of Powell. The head of the monetary authority used a discourse very calibrated to respond to the uncertainty of Wall Street.
MORE INFORMATIONTrump, after the sharp fall of Wall Street: “The Federal Reserve has gone mad” U.S. moderates slightly the growth in the third quarter The U.S. Federal Reserve prepares the ground to raise rates in December, the U.S. created more jobs than expected in October, and it keeps the unemployment at 3.7%
While Powell has defended his strategy, at the same time it indicated that it will be less aggressive than was feared, affirming that interest rates are “just below” what is considered a neutral position for the economy. Would that justify eventually a pause to assess the situation. On the floor you see a new increase in December, although you should clarify what will happen after.
Powell noted that the economy is growing for the trend. The growth in advances this year at a rate of 3% and unemployment is at 3.7%. At the same time, he noted that interest rates “remain low” when it is taken as a reference the historical trend and insisted that the strategy we are following is that of balancing the risks. For this reason, he came back to repeat that there is no course preset, and that the decisions will be guided by the data.
there Was great expectation for his speech to the Economic Club of New York, for two reasons. The first, your comments have place hours after Donald Trump returned to charge against its strategy, in an escalation that began in the summer. In an interview with the Washington Post admitted to not being "not happy" by appointing him to hold the reins of the central bank. His argument is that rising rates put an obstacle to their economic plan.
Also what was considered as the main factor of volatility in the markets. But his rhetoric was understood as a complaint with electoral purposes, which looked to legislative in the medium term. Powell insists that the increase in the price of money aims to avoid overheating Casinoslot the economy by an excess of stimuli. And at the same time, it ensures that the standardization process will be "gradual" and will be based on the data that you have available in every moment.
"wrong," responds Trump, " my instinct tells me a few times over things that the mind of anyone." The republican had said until now that he liked Powell and it does not seek to interfere in their decisions. But with the double language that characterizes him, he went on to say that the Fed was "crazy" and that I should lose even the interest rates, "for the good of the country". The criticism publicly to the president of the Federal Reserve is considered to be undermines the independence of the institution.
The second reason is that a comment that he made last October in a speech, in which she indicated to the market that were not even close to a neutral position. Since then, the stock indices were moving in the area of correction anticipating a more aggressive policy despite the fact that the president of the central bank is usually very careful to speak of projections or of the course of the policy. Powell is now be more balanced, saying that it is “just below”.
Powell took the reins of the Fed in February. Under its mandate, adopted a three-increments types. The next meeting will be on 18 and 19 December. The types are from September to between 2% and 2,25%. Richard Clarida, vice president of the Fed, opened the waters in the eve to say that it would be already near the point at which interest rates neither stimulate nor restrict the economy, which would justify a pause. John Williams, of the New York Fed, is of the same opinion.
The prospects point out, in addition, a moderation in growth, when you pass the effect of the fiscal stimulus. Also make ballast slowdown, global geopolitical tensions and the battle of duty. Powell warned Wednesday, also, that the escalation of corporate debt is an area of risk. The pressure in the valuation of assets, called high, but pointed out at the same time, the tolerance of the investors is high at this time.
The last internal survey indicated as a potential three-increments types in the course of 2019. But on the floor of Wall Street is bet at this time more by one or as much two. Powell is seen as a person pragmatic and knows that the stress in the markets may create a problem. That's why he tried to give assurances that his strategy seeks to achieve a balance. Will not go very fast but not too slow, “because you can create other distortions”.