- The Washington Times - Wednesday, November 28, 2018

Stocks rose sharply Wednesday after Federal Reserve Chairman Jerome H. Powell, who is under fire from President Trump, suggested that the Fed might slow the rise in interest rates.

Mr. Powell, in a speech at the Economic Club in New York City, said interest rates are “still low by historical standards,” and “would be neutral for the economy — that is, neither speeding up nor slowing down growth.”

“There is no preset policy path,” he said of interest rate hikes.

The Dow Jones Industrial Average shot up after the speech, rising 618 points, or 2.5 percent, to close at 25,366.

The S&P 500 rose 2.3 percent, and the tech-heavy Nasdaq climbed 2.9 percent.

But Mr. Powell also said the stock market’s recent sell-off doesn’t pose big risks to the U.S. financial system, a comment that many analysts took as a signal the central bank won’t abandon its push to raise interest rates.

“It is important to distinguish between market volatility and events that threaten financial stability,” Mr. Powell said. “Large, sustained declines in equity prices can put downward pressure on spending and confidence. From the financial stability perspective, however, today we do not see dangerous excesses in the stock market.”

Mr. Trump has criticized the Fed and Mr. Powell for slowing the momentum of economic growth by raising interest rates. He told The Washington Post on Tuesday that he wasn’t “even a little bit happy with my selection” of Mr. Powell to head the Fed.

The markets also could have been responding to comments from White House officials that Mr. Trump is open to resolving his trade dispute with Chinese President Xi Jinping when the two leaders meet at the Group of 20 summit in Argentina this weekend.

Mr. Trump has argued that the Fed’s policies are damaging the economy and pointed to the recent stock market declines and General Motors’ announcement Monday that it would cut up more than 14,000 workers in North America and put five plants up for possible closure.

Higher interest rates tend to slow economic growth over time as well as pressure stock prices. For those reasons, this year’s increases have made the Fed the target of unusual public attacks from Mr. Trump — criticism that has accelerated with the past month’s sharp declines in the stock market.

Mr. Trump has complained that the Fed is threatening to undo the economic stimulus being provided by the tax-cut legislation he signed in December and that the central bank’s rate increases are unnecessary because inflation has remained relatively low.

In its most recent projections, the Fed forecast that it would raise rates in December for the fourth time this year, followed by three more hikes in 2019. Its benchmark short-term rate is in a range of 2 percent to 2.25 percent, with the increases gradually raising borrowing costs for consumers and businesses.

Analysts think an increase next month is all but certain, possibly in part because they think the Fed doesn’t want to appear to be bowing to pressure from Mr. Trump. But some economists say three rate increases for next year are beginning to look less certain.

⦁ This article is based in part on wire-service reports.

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