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November 30, 2018 @ 10:46 +03:00
With the Federal Reserve expected next month to raise rates to what some U.S. central bankers believe is at or near a neutral level, Chairman Jerome Powell is retuning his message to signal a more cautious approach on further rate hikes next year. It is not clear whether the idea of perhaps nudging rates above neutral, as he had earlier suggested, is still on the table, or if it means he expects fewer rate hikes, or even a pause. But minutes from the Fed’s Nov. 7-8 policy-setting meeting, released on Thursday, as well as remarks over the last two weeks, point to a reassessment of the Fed’s longstanding promise of “further gradual rate increases” that would extend two years of nearly uninterrupted quarterly tightening.
The transition comes as the Fed’s target policy rate, left at 2 percent to 2.25 percent in November, grinds closer to the 2.5 percent to 3.5 percent range of Fed officials’ views of where a rate that neither boosts nor cools a healthy economy lies. Back in August, Powell had rejected a too rigid reliance on an abstract guidepost like the neutral rate to shape policy, saying it could lead to costly mistakes. Yet he has kept talking about it.
There are many reasons why Powell would pick now to begin shifting his footing. Since a September news conference when he painted a rosy picture of where things stood, some economic indicators have softened; others, such as wage growth, have firmed, leaving the Fed for the first time in a long time pulled in different directions. Then there is President Donald Trump, who has berated him for raising rates. And Powell’s own communications plans to end each meeting with a news conference starting next year mean he needs a clear message for each meeting, starting next month.