Fed interest rate hikes appear on course after chair Jay Powell's address

Fed interest rate hikes appear on course after chair Jay Powell's address

Global equity markets rose on Friday after Federal Reserve Chairman Jerome Powell said the USA central bank's policies are best to keep the economy humming, spurring new highs on Wall Street, while oil surged on signs Iran sanctions may crimp worldwide supply.

Wrapping up the Fed's annual retreat in Jackson Hole, Wyoming, the president's handpicked choice to succeed Janet Yellen brushed off Trump's concerns that continued increases in interest rates could derail the United States economy.

For now, the chairman has maintained that gradual interest-rate increases are the best way to balance those risks.

Powell made no mention of Trump's criticism of the Fed's monetary policy.

"For equities, the key point will be whether Powell indicates that the Fed is poised to hike rates two more times his year".

Benchmark 10-year U.S. Treasury notes US10YT=RR rose 2/32 in price to push yields down to 2.8152 percent.

Point Bridge Capital Founder Hal Lambert, IHT Wealth Management President Steve Dudash and Payne Capital Management President Ryan Payne on the report that President Trump isn't "thrilled" with Federal Reserve Chairman Jerome Powell for raising rates. But he also pointed out the risks of being too dovish.

Fed funds and eurodollar futures prices indicate financial markets expect only one rate hike next year, leaving rates in a range of 2.50 percent to 2.75 percent by mid-2019, up from the Fed's current target of 1.75 percent to 2.00 percent. In this case, the EUR/USD will likely find acceptance above the 50-day MA, now located at 1.1608.The German second-quarter GDP, due for release at 06:00 GMT, and the US durable goods orders figure, scheduled for release at 12:30 GMT, may not have a big impact on the pair as investors are likely to stay on the sidelines ahead of Powell's speech. "If the strong growth in income and jobs continues, further gradual increases ... will likely be appropriate".

Investors are pricing in another quarter-point increase from the central bank at their meeting next month.

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Two regional Federal Reserve bank chiefs say they favor further interest-rate increases and Trump criticism wouldn't influence US central bank policy.

There is scant evidence that the Fed's removal of stimulus is hurting growth. Fed officials have been forced to question the location of its "guiding stars" of economic policy, said Powell: the assumed levels for the natural rate of unemployment, neutral interest rate and stable inflation.

To emphasize the Fed's attention to inflation, Powell borrowed a line that European Central Bank President Mario Draghi used in July 2012 to preserve the euro.

"The economy is strong", Powell said.

Powell's comments at the annual gathering of economic policymakers in Jackson Hole, Wyoming, will be viewed as a rebuke to the president.

So far, it has been.

Strong economic growth and earnings and low interest rates have combined to continue to move the US equity market higher, said Leo Grohowski, chief investment officer for BNY Mellon Wealth Management.

"Over time, inflation has become much less responsive to changes in resource utilization", Powell said.

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