Fed Jerome Powell low-level neutral rate

The President of the United States Federal Reserve, Jerome Powell, He once again defended the cycle of interest rate increases in the country's federal funds, facing growing questions from President Donald Trump and other White House authorities.

In a speech to the New York Economic Club, Powell said the main entity – as well as private sector economists – expect "continued strong growth, low unemployment and inflation close to 2%".

The monetary authority has acknowledged that the current level of the rate is "just below which a wide range of estimates suggest would be neutral for the economy; that is, they neither accelerate nor slow down the economy. "

Your comment differs from what he himself pointed out in October, when he said the bank was "far away" from bringing rates down to the neutral level.

The turning point could be interpreted as a sign that hikes will be slower than expected a month ago. Trump insisted this week on his criticism of rate hikes and, according to information released by Bloomberg, Treasury Secretary Steven Mnuchin has gathered opinions on monetary normalization in the financial market.

The change has raised doubts among Wall Street operators. Peter Bookvar, head of investment at Bleakley Group, told FT that "no one really knows what the neutral rate is (…) I think Today's comments exclude any time they want to go beyond 3% and that the markets celebrate it."

Ian Shepherdson, Pantheon Macroeconomics economist, said "Powell's vision could shift to slower increases, but in our view, I did not report an imminent change"in the plans of the bank.

"As always, the Fed will finally do what the data tells it," he said.

Powell also said that "the economic effects of our incremental increases are uncertain and could take a year or more to be completed." He added that "there is no pre-established path" for monetary policy.

Most markets expect the Fed to raise the interest rate by 25 basis points again at its December meeting. The entity has delimited Three more moves for 2019, but Powell insisted today that it would depend on economic data.