Fed chief Powell reports that the central bank has finished signaling

United States. Federal Reserve Chairman Jerome Powell has a new message for financial markets: look at data on employment, wages and inflation to get signals on monetary policy.

This is a big change for the Fed, which for the better part of the last decade has done everything in its power to steer the markets on its political intentions by feeding a fragile economy to the post-crisis recovery. financial.

In the context of these so-called forward-looking guidelines, the Fed has for years described its policy as "accommodative" to ensure that markets do not strangle economic growth.

Chart – Change of adaptation to the Fed: tmsnrt.rs/2N4NL1x

But on Wednesday, the Fed removed this sentence from its policy statement.

Some investors read the change as a sign that the central bank was about to end the cycle of rising interest rates that began in December 2015; Michael Feroli, JP Morgan's US economist, called it "a stretch".

Noting that the US economy is experiencing a "particularly positive moment", with unemployment expected to remain low, inflation stable and no recession in sight, Powell said at a press conference on Wednesday that the deletion of the wording "accommodating" was not a policy. signal at all.

"The question we are answering is how to provide the economy with the right amount of support – not too much, not too much – to support the recovery and achieve our statutory goals of full employment and inflation at 2%", said Powell.

"We also do not want to suggest that we have this precise understanding of where the accommodations stop or suggest that this is a really important point in our thinking. What we are going to do … carefully monitors the incoming data. "

The Fed on Wednesday announced a widely expected rate hike, its third of the year, raising its target range for its key rate to a rate of between 2% and 2.25%.

The new economic forecast released Wednesday showed that most policymakers expected the central bank to raise rates five more times before stopping for some time in 2020.

But Powell, in fact, said not to put too much in these forecasts because they could change with the incoming data.

He pointed out that he was unsure when the rate hikes he expected with his colleagues over the next two years would start to weigh on economic growth, or if the underlying momentum of economy had accelerated enough to offset this slowdown.

As the Fed raises its rates, it will look for signals from the economy, such as a slowdown in the labor market or the economy, rising wages or inflation, or a sudden tightening financial conditions, to put an end to its tightening cycle, "he said.

David Papell, a professor of economics at the University of Houston, summarized Powell's approach to "Let's wait and see."