Fed Chair Powell Pledges Patience, Sensitivity to Downside Risks

Jerome Powell

Jerome Powell

United States stocks opened the session higher following the December jobs report and added to gains after Federal Reserve Chairman Jerome Powell said the U.S. central bank had no "pre-set" plan for interest rates and was carefully monitoring economic conditions.

Powell also said he had not received any direct communication from the White House about unhappiness with the central bank's rate policy, nor had any meeting between the president and him been scheduled. "We are always prepared to shift the stance of policy and to shift it significantly" if needed.

US President Donald Trump has been one of the loudest critics of the rising rates, which raise the cost of borrowing and risk dampening economic growth.

A new jobs report on Friday showed United States employers added more than 300,000 jobs in December - well above expectations. Wages also rose, while the unemployment rate improved, the Labor Department said.

"Patience is the right approach", when the Fed is getting conflicting signals from the hard data, which is backward-looking, and the financial markets, which are looking ahead to downside risks, said Kohn, now a senior fellow at the Brookings Institution in Washington.

OPEC Oil Exports To The US Fall To Five-Year Low
Earlier this week, official data showed United States output reached a record in October and Iraq boosted oil exports in December. Others are not sitting idle, with Russian output reaching a record of more than 11 million bpd in 2018.

Stocks had already been pointing up in pre-market trading, but the rally really set in after Powell said that the Federal Reserve will not pursue a "preset path" for interest rate hikes but will consider their potential impact on the market.

"If we ever came to the conclusion that any aspect of our plans was somehow interfering with our attainment of our statutory goals, we wouldn't hesitate to change it, and that would include the balance sheet, " he said.

"We've been willing to revisit our views, very much willing to revisit our views, of what the natural rate is, and also our understanding of what it is", Powell said.

The up move in DXY evaporates following Powell's speech. American presidents of the past quarter-century have kept private their opinions about Fed policy so the Fed can focus on employment and inflation rather than feel pressure from the short-term wishes of politicians.

Markets soared on Friday ー the Dow Jones Industrial Average closing the day up close to 750 pointsーfollowing comments by Fed Chair Jerome Powell on monetary policy and reports that the jobs market is not slowing.

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