Powell Vs. Trump: Fed Chair Hits Dovish Tone As President Ramps Up Criticism

Investors got what they were hoping for from the Federal Reserve Wednesday when Chairman Jerome Powell said interest rates are currently “just below” neutral.

Powell’s statement comes after he was harshly criticized by President Donald Trump this week, who appointed Powell as Fed chair earlier this year.

More Dovish Fed

Powell’s latest language is much more dovish than a statement he made in October in which he said rates were still “a long way” from neutral.

“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth,” Powell said at the Economic Club of New York on Wednesday.

The fed funds rate stands at a target range of between 2 percent and 2.25 percent. Economists widely anticipate more rate hikes in the next year, but Powell said there's no present plan for monetary policy.

“While FOMC participants’ projections are based on our best assessments of the outlook, there is no preset policy path,” Powell said.

Trump’s Criticism

Trump lashed out at Powell Tuesday, telling The Washington Post he has been displeased with Powell’s rate hikes since he took over as Fed chair.

“So far, I’m not even a little bit happy with my selection of Jay,” Trump said.

“They’re making a mistake because I have a gut and my gut tells me more sometimes than anybody else’s brain can ever tell me.”

The central bank has historically operated independently of political influence, and Trump’s criticism of Powell is unusual compared to the behavior of past presidents.

Whether or not the more dovish take from Powell was a result of pressure by Trump, investors cheered the news. The SPDR S&P 500 ETF Trust SPY was up 1.5 percent Wednesday afternoon. The Dow spiked higher around 12 p.m. ET and was up nearly 500 points at time of publication.

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