Stocks surged on Wall Street Wednesday, powering a 600-point gain in the Dow Jones Industrial Average, after the head of the Federal Reserve hinted at slower interest rate increases. That seemingly casual comment, in an interview with PBS' Judy Woodruff, sent stocks and other risk assets into a tailspin, with the S&P 500 briefly entering "correction" territory, or a 10% drop from its record highs.
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While markets still expect a rate hike in December, Mr Powell said, "there is no preset policy path". That is not what he said.
Most recently, I suggested that judging the stance of monetary policy on the basis of the still historically low level of interest rates failed to take into account the impact of the Fed's dramatic contraction of liquidity via its balance-sheet reduction.
"So far, I'm not even a little bit happy with my selection of Jay. Of course, we will continue to monitor developments in this sector carefully", Powell said.
US President Donald Trump will also be interested in the statement, and he expressed his displeasure with Powell in an interview on Tuesday.
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.
In turn, the October range is in focus, with a break/close below the 112.40 (61.8% retracement) to 113.00 (38.2% expansion) area raising the risk for a move towards the Fibonacci overlap around 111.10 (61.8% expansion) to 111.80 (23.6% expansion). The objective of higher interest rates is to slow the economy and prevent inflation. "Our path of gradual increases has been created to balance these two risks, both of which we must take seriously".
A day after President Donald Trump's latest attack on the United States central bank, Federal Reserve chief Jerome Powell hinted Wednesday (Nov 28) the key lending rate would move higher but said there was no preset course.
The Fed is also supposed to operate independently of the government, immune from political influence.
"I'm doing deals, and I'm not being accommodated by the Fed", he said. "They're making a mistake because I have a gut and my gut tells me more sometimes than anybody else's brain can ever tell me".
"Congress assigned the Federal Reserve the job of promoting maximum employment and price stability".
That's clearest in Eurodollar futures, which reflect the market's expectation for the three-month Libor (the London interbank offered rate, a key money-market benchmark).
Tensions over trade, the turbulent Brexit discussions and trouble in China and emerging markets could rock a U.S. financial system where asset prices are "elevated" and business credit quality may be "deteriorating", the Federal Reserve said in a first-ever report devoted to financial stability.