Fed's Powell signals interest rates near neutral in speech

By The FedFOXBusiness

Effects of rate increases may take a year or more to be fully realized: Powell

Federal Reserve Chairman Jerome Powell on the potential economic impact of the Federal Reserve's gradual interest rate increases.

Federal Reserve Chairman Jerome Powell struck a generally optimistic note on Wednesday about the state of the U.S. financial system and indicated that interest rates, while still low by historical standards, are near neutral, sending stocks higher.

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“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy -- that is, neither speeding up nor slowing down growth,” Powell said while speaking at the Economic Club of New York. "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."

In his highly anticipated address, which came on the heels of a tumultuous month for the markets, Powell noted that the central bank is trying to carefully strike a balance between raising interest rates too quickly, and too slowly.

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“There is a great deal to like about this outlook,” he added. “But we know that things often turn out to be quite different from even the most careful forecasts.”

Fed policymakers have already voted to hike the benchmark federal funds rate three times this year, and are expected to do so again in December.

President Trump has been a vocal and outspoken critic of Powell -- whom he selected to replace Janet Yellen as Fed chair -- saying he was “not thrilled” with him. He kept up his criticisms with Powell on Tuesday, saying rising interest rates have hurt the economy.

"So far, I’m not even a little bit happy with my selection of Jay," Trump told The Washington Post.”Not even a little bit. And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off-base with what they’re doing."

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