Powell supports rate hikes; declares the financial risks contained in Reuters

By Jonathan Spicer and Rodrigo Campos

NEW YORK (Reuters) – US Federal Reserve Chairman Jerome Powell announced Wednesday the end of US central bank interest rate hikes, saying interest rates are now " just below "neutral estimates less than two months after saying rates were likely. "A long way" from this point.

In a speech that followed a volatile new selloff, Powell left little sign of the length of tightening of the US central bank's policy, while saying that the key rate, set at 2-2.25%, is now "just below". wide range of neutral estimates, which ranged from 2.5 to 3.5% in September.

"We know that forecasts often turn out to be very different from the most cautious forecasts," Powell said at a luncheon hosted by the New York Economic Club. "Our progressive pace of rising interest rates has been a risk balancing exercise."

The Fed has moved into a quarterly rate hike cycle and is expected to tighten its policy next month. However, the signs of a slowdown abroad and almost two months of market volatility – including a strong sell last week – have cast a gloomy American picture, in which the economy far exceeds potential and unemployment is at its lowest since the 1960s.

Powell said the Fed is paying "very close" attention to economic data, even if it predicts "solid" growth, a low unemployment rate and inflation close to its target of 2%.

The Fed takes equally seriously the risks of a too rapid rise and a reduction in economic expansion, and on the other hand a too slow rise and fallout. 39, an increase in inflation or financial instability, he said.

The decline has been about 8% since the beginning of October, when Powell had expressed a rather confident tone with respect to the economy and the need for the Fed 's. 39, avoid overheating. Powell and other Fed officials have since been a little more cautious, leaving a slowdown in Europe, Japan and China.

Earlier Wednesday, the Fed released its first-ever Financial Stability Report, warning that trade tensions, turbulent Brexit discussions and unrest in China and emerging markets could shake up a US financial system where badet prices are "high" and credit quality may be "deteriorated".

The report also noted several signs of the financial system's resistance to the types of unforeseen shocks that could occur. "My own record," said Powell, "is that if the risks are higher than normal in some areas and below normal in others, the vulnerability of overall financial stability is at a moderate level."

He added that the high level of leveraged loans to companies could worsen any economic slowdown.

But Powell said: "In my opinion, such losses are not likely to jeopardize the safety and soundness of the institutions at the heart of the system, but rather to bring down investors in vehicles such as secured loan obligations with stable financing that presents little threat of damaging fire sales ".

He added that the Fed did not see "dangerous excess" in the stock market, where forward price / equity ratios remained in historical norms.