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The Fed chairman recently became the target of attacks by US President Donald Trump.
(Photo: AFP)
New YorkMarkets were waiting for this signal. Jerome Powell, governor of the powerful Federal Reserve, hinted that interest rates had almost reached neutral levels. This is a cautious turnaround from the previous one, and investors are hopeful that rate hikes will now be slower.
Powell's speech at the New York Economic Club was eagerly awaited. The Fed chairman recently became the target of attacks by US President Donald Trump. He accuses him of stifling the economy with the expected interest rate hikes. Observers are now wondering if Powell is not complying with Trump's pressure and is not easing his gradual rate hikes.
"Interest rates remain low by historical standards, and they are currently only marginally below the broad range of expectations considered neutral for the economy – neither accelerating growth nor the pace of growth. slow down, "said Powell in his speech.
The Fed's previous decisions had been a balancing act, he said. He also made a small sideline on Trump. Powell recalled that the central bank had already been attacked.
Thus, former Governor William Harding spoke in March 1929 in front of the New York Economic Club, worried about high stock prices and was severely criticized. A few months later, the stock market and finally the global economy collapsed.
Soothing words were also raised about the debt: "We do not find for the moment an abnormal level of debt," he said. In addition, there is a risk that financing of financial institutions may be weak. Financial institutions and markets are holding up better than before the crisis.
Even with the debts of households and businesses, he sees no great danger. Today, households are significantly less indebted than before the last financial crisis. Although corporate debt has increased recently, this is normal given the strength of the economy. However, individual companies are sometimes too indebted. But that does not mean that they could endanger the entire financial system.
Powell also believes that the stock market is currently not very threatened: "We do not see any dangerous excess on the stock market". Stocks are not overvalued today, given the underlying earnings of companies.
However, potential problems could be US trade policy, Brexit and Italy's budget negotiations with the EU.
He compared the recent report on financial stability on the financial system situation to a positive balance sheet of a baby boomer like him: "We have to keep a few points to the point". mind, but all together, you are in good health. "
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