Dovish Fed Chief Powell Delivers What the Markets Wanted

'No' Jerome Powell won't resign

On Friday, the Labor Department reported the USA added 312,000 jobs in December, much above analyst expectations. "We don't believe our issuance is an important part of the story", he said.

"What does what is going on in the financial markets tell you about the fundamentals?" Technology stocks, which have been especially volatile in recent months, were among the biggest gaining. The negative news however may have led the chairman of the Federal Reserve to say that the central bank would be "patient" when it comes to raising interest rates.

The President has repeatedly criticized the Fed's increasing monetary restrictions and interest rates, which he blamed for the market drop in a phone call with Fox News host Shannon Bream in October.

The S&P 500 Index jumped 3.4 per cent on Friday in response, though the stock gauge is still off about 14 per cent from its September peak. Stocks have been pressured since mid-December when the Fed raised its benchmark interest rate a quarter-point while issuing a somewhat-hawkish statement despite lowering its rate hike projections from three to two.

The head of the Fed, once confirmed by the Senate, can only be removed "for cause", not a policy disagreement.

Powell's appearance in Atlanta was his first since last month's rate increase and a public lashing from Trump, who according to sources asked aides about his power to fire the Fed chairman.




Trump has complained that the Fed has pushed rates higher despite the fact that there is no evidence that inflation was getting out of control. He also said that he would not resign if asked to do so by U.S. President Donald Trump.

Powell's willingness to be flexible on interest rates was welcome news to investors, many of whom anxious that Fed chair risked cutting off the current economic expansion by continuing to raise interest rates despite signs the US economy was cooling off a little. "We're always prepared to shift the stance of policy and to shift it significantly if necessary".

"I found it actually quite surprising how benign markets were for such a long time, despite the risks of trade wars and other things that were going on", Bernanke said in an observation that's shared privately by some Fed officials.

The recent market turbulence has posed a dilemma for the Fed, as a seeming loss of confidence in financial markets about the US economy's prospects was offset by upbeat data from the real economy, including a strong December jobs report.

"We are in a new world", Mester said, where the obvious need to raise rates has given way to a situation where economic growth is expected to slow, wages are rising on the basis of low unemployment, interest rate sensitive sectors of the economy like housing have ebbed, and the unemployment rate has roughly "stabilized" at a low level.

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