[ad_1]
The US administration confirmed earlier strong economic growth of 3.5% in the third quarter despite household consumption, the traditional engine of the world's largest economy, less sustained.
And, Jerome Powell still expects a steady pace for the entire year combined with a historically low unemployment rate. These data support the idea of continuing, for now, interest rate increases after the three already endorsed this year.
"Interest rates are always low if we take the historical criteria and they remain just below (…) a level that would be neutral for the economy, that is to say without stimulating , nor slow down growth, "he said in a speech to the New York Economic Club.
These comments, which come in the wake of fierce criticism of the president accusing the Fed of making a mistake by raising its rates, were immediately welcomed on the markets that were waiting for details on this famous "neutral rate" and wanted to see in the remarks of Powell signals a slowdown in the pace of rate tightening.
The specialists are very divided on what is concretely such a rate for a given economy. As for the United States, economists mention a rate around 3%. The key interest rate set by the Fed is currently 2.25%.
Jerome Powell also recalled that the Monetary Committee had estimated about three years ago that "extraordinarily low rates" were no longer in the interest of households, businesses, savers and borrowers.
He further insisted that the pace of "gradual increases" in rates was designed to balance the two risks: neither too much stimulation nor slowdown. He also pointed out that Fed officials scrutinized the economic data carefully before making any decision.
"The Fed is next to the plate", however had deplored Tuesday Donald Trump, regretting to have appointed Jerome Powell to this key position for the economy.
Trump is far from the only one to worry about the Fed tightening interest rates after almost a decade of virtually free money.
Some economists fear that this policy kills an almost perfect economy, with sustained GDP growth, unemployment at 3.7%, the lowest in 48 years, and controlled inflation.
Source link
