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US stocks decline as trade angst weighs; TSX slightly up

US stocks decline as trade angst weighs; TSX slightly up

Powell's comments ignited a rally on Wall Street, with the Dow Jones Industrial Average surging more than 200 points after his remarks were released.

However, being just below neutral doesn't necessarily mean that the Fed is nearing its limit in terms of hiking rates as the range for neutrality can vary.

"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 during a speech at the Economic Club of NY.

On their face, the comments were a reversal from early last month, when Powell said the key interest rate was probably still a "long way" from a so-called neutral level and that the Fed might even tighten policy beyond that level. It promises to confirm investor expectations that the Fed will raise its interest rate when it meets later this month.

The Federal Reserve chairman has presided over three interest rate increases this year and is widely expected to hike again in December.

"Almost all participants expressed the view that another increase in the target range for the federal funds rate was likely to be warranted fairly soon, " assuming the economy performs in line or stronger than their expectations, the central bank said in the minutes of its November 7-8 session released in Washington Thursday.

US President Donald Trump has repeatedly attacked Powell for raising the benchmark lending rate but the Fed chief and other officials say the attacks have no influence on the deliberations of the independent central bank (AFP
Dollar weakens as cautious Fed leads to rate-hike rethink

Trump has repeatedly blasted Powell's decision to hike the rate so drastically at once, appearing to pin October's volatile stock market performance on that development.

A few participants who agreed further rate increases were likely to be warranted also "expressed uncertainty about the timing" as Fed officials discussed how to communicate a possible change in their approach to future hikes. Any slowdown or pause in the Fed's rate hikes would be welcome news for a stock market that's been battered by fears that the Fed's continued credit tightening could end the long bull market.

Markets are now trying to divine Powell's plans from data pulling in two directions - rising wages that could be a precursor to inflation, for example, compared to slowing growth and falling oil prices that may keep inflation down, or other indicators clouding the picture.

But Mr Powell's most recent words should be taken along with other recent remarks in which he showed concern for the global economic outlook. The law creating the Fed says such officials can be "removed for cause". He tried to dismiss as premature questions over whether the Fed would need to raise rates above neutral to a level aimed at slowing growth.

Paul Ashworth, chief USA economist at Capital Economics, said he expects two rate hikes in 2019, not the three the Fed has been projecting for next year.

"I'm doing deals, and I'm not being accommodated by the Fed", Trump said. Investors have been bracing for higher interest rates in the face of possible inflation stemming in part from Trump's trade wars as well as the tax cuts he pushed through Congress late previous year. For those reasons, this year's hikes have made the Fed the target of unusual public attacks from Trump - criticism that has accelerated with the past month's sharp declines in the stock market.

Why Cold Snaps Don't Disprove Climate Change
To put it more plainly, the seasons will change and there will still be cold days during global warming. This sort of thinking - anecdotes = data - is disproven time and time again by the actual science.

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