Fed Mandated To Answer For Interest Rates

By Selina Stoller, Summit Consumer Receivables Acquisitions, LLC ***

Americans should get some answers soon about the future of interest rates.

Fed Chairman, Jerome Powell heads to Capitol Hill this week for his congressionally mandated testimony before House and Senate committees. Wall Street is hoping Powell eases market fears and conveys the Federal Reserve’s intentions after a series of communication missteps and backtracks that began last fall.

In October of 2018, Powell announced that the Fed was “a long way” from a neutral interest rate. Then in December, he continued by saying the process of reducing the balance sheet was on “autopilot.” Powell’s statements in January and February of this year then seemed to pivot from his previous stance generating criticism that he was operating at Wall Street’s whims.

Powell’s first stop is on Tuesday before the Senate Banking Committee then Wednesday before the House Financial Services Committee. He will most likely be quizzed on the economy, interest rates, the Fed balance sheet, and other items. These testimonies will give him a chance to chart a clearer course for the Fed that hopefully features less uncertainty.

One area Powell will need to be clear on is the economy. His communication at the end of 2018 gave the perception that the Fed was not seeing the beginning of a global slowdown. Investors began to fear the Fed would continue to tighten policy and raise interest rates despite what the data showed.

Many investors have had enough market turmoil after 2018’s volatile fourth quarter. The market will be watching very closely to try to confirm nothing has changed. There is a desire for “nothing new” after major indexes slumped, momentarily hitting a bull market on the belief that Powell and the Fed were not listening to the signals the market was sending.

Experts are anticipating Powell to continue to emphasize a relaxed policy stance and will make it clear that the Fed is mindful – but there is the risk Powell could take the opposite position. Either way, everyone is hoping Powell expresses his desire to sustain market expansion as opposed to holding it back.

  • 26 Feb, 2019
  • Josh Smith

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