Powell muddies Fed’s monetary message to pacify markets for now

Powell muddies Fed’s monetary message to pacify markets for now

"We will be patient as we watch to see how the economy evolves", he said.

U.S. Federal Reserve Chairman Jerome Powell on Friday signaled patience in the central bank's policy contemplation for this year despite a higher-than-expected job growth data released on the same day.

The tech-heavy Cheddar 50 Index, which measures the performance of Cheddar's 50 top companies ー from Apple ($AAPL) to GM ($GM) ー gained 5.4 percent on Friday, amid broader market gains.

The Fed raised its benchmark interest rate four times in 2018, with the latest announced on December 19, when Powell said his institution's policy decisions are "not on a preset course".

The head of the Fed, once confirmed by the Senate, can only be removed "for cause", not a policy disagreement.

Appearing on a panel with his two predecessors - Yellen and Ben Bernanke - Powell also said that the Fed could alter its approach to trimming its huge balance sheet if it determines such a change is needed.

Since mid-December, investors have been expressing disagreement with Powell's assessment of the economy, saying the Fed had it all wrong and that the economy was weakening.

Earlier, stock markets were buoyed by news that China and the United States will hold trade talks in Beijing on Monday and Tuesday. Powell responded with a terse "No" when asked if he would resign if Trump requested him to do so. Asked if he had had any face-to-face meetings with Trump, Powell said he had not although he said previous Fed leaders have had discussions from time to time with previous presidents. "The Fed has wilfully ignored trade and interest rate risks while talking a hawkish game".

The Labor Department reported on Friday that 312,000 jobs were created last month, well above market expectations.

USA and European stocks got a boost as the stronger-than-expected jobs report soothed some concerns of slowing economic growth.

Powell called the jobs report "very strong", with USA data "on track to sustain good momentum into the new year". "There aren't signs of significant economic weakness".

"The Fed has got a communication problem" when it comes to the balance sheet, said Wrightson ICAP LLC chief economist Lou Crandall. In the meeting, Powell spoke about what he makes of the U.S. economy and how he plans to adjust the monetary policy.

The Fed's tightening cycle includes both rate hikes and the gradual shedding of its more than $4 trillion in assets.

While not a change in policy, it was a nod to market concerns that the Fed had a key decision on "auto-pilot", as Powell put it last month, even as it pledged to be dependent on economic data. "I have no news for you on that". But she said the turbulence may also stem from a different view of the economy than that shared by many Fed officials who feel confident USA growth will remain on track for the next year, with labour markets still strong.

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