By Selina Stoller, Summit Consumer Receivables Acquisitions, LLC ***
After a year of interest rate increases, the Federal Reserve is looking to be more “patient” in 2019.
Following four key interest rate hikes in 2018, Federal Reserve Chairman Jerome Powell has said the central bank will be cautious as it weighs future interest rate hikes in light of low inflation – also adding policymakers will take into account recent stock market volatility.
“With muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves,” Powell said during a recent discussion at the American Economic Association and Allied Social Science Association’s annual meeting in Atlanta.
At the beginning of the year, the Dow Jones Industrial Average was already up 400 points following a booming jobs report and then jumped another 400 points following Powell’s statement.
While Fed officials have been giving with a generally positive view of the U.S. economy. Powell noted the market plunged from its early fall peak due to fears of slowing global growth, trade disagreements with China, and other factors.
In regard to the Fed’s $3.5 million portfolios of bonds purchased during and after the Great Recession, Powell is mentioning flexibility. According to Powell, the Fed is prepared to adjust the plan as appropriate to achieve the objectives of solid economic growth and stable inflation.
In contrast, Powell’s December news conference focused on the Fed’s view that the balance sheet reduction was on “autopilot” and the Fed was relying on short-term benchmark interest rates to modify the economy’s temperature.
These remarks fueled investor concerns that Powell and the Fed were moving forward with a campaign to slow the economy despite little evidence of inflation, market turbulence, slowing global growth and forecasts for weakening activity in America. President Trump has repeatedly criticized Powell for elevating rates and hindering faster economic growth than Trump has promised.
In December 2018, Fed policymakers forecasted two rate hikes in 2019, down from its previous estimate of three. After these predictions, the economy tumbled and stumbled. For now, the markets are expecting no rate increases in 2019.
- 29 Jan, 2019
- Josh Smith