Jerome Powell, chairman of the U.S. Federal Reserve, speaks at a meeting of the Economic Club of NY in New York, U.S., on Wednesday, Nov. 28, 2018. "We also know that moving too slowly - keeping interest rates too low for too long - could risk other distortions in the form of higher inflation or destabilizing financial imbalances".
His remarks on Wednesday were a distinct shift in tone from early October, when the Fed chairman suggested the central bank might go "past neutral, but we're a long way from neutral at this point, probably". Stocks swooned on those remarks as investors bet the US central bank would need more rate hikes to prevent the economy from overheating.
His shift follows criticism from US President Donald Trump who nominated him for the role past year.
Trump on Tuesday again blasted his hand-picked chief of the U.S. central bank, saying he was "not even a little bit happy" with his selection of Powell.
And a "couple" said the Fed might be near the neutral rate, meaning more rate hikes "could unduly slow the expansion", driving down inflation. The chief source of the change in orientation was not any major shift in the USA economy, but the reaction in financial markets to expectations that the Fed would keep lifting rates next year after an expected 0.25 percentage point increase in December.
"We're seeing both the Canadian and USA stock markets posting some pretty decent numbers today", said Candice Bangsund, portfolio manager for Fiera Capital.
"Our gradual pace of raising interest rates has been an exercise in balancing risks", Mr Powell said.More news: Kanye Responds to Jay-Z’s Tweet with "Throne 2"
"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", Mr Powell told the Economic Club of NY.
Mr. Powell's October remark came during an unscripted moment at a moderated discussion in Washington.
A few officials expressed concern about rates moving too high too quickly. Investors had been anxious that too many rate hikes at too fast a pace would raise the cost of borrowing across the board, from mortgages to auto loans.
The fresh volatility has prompted Trump to blame the Fed for the wobbling stock market. "This was again on display today", RBC Capital Markets chief US economist Tom Porcelli wrote in a note. At the September meeting, the Fed signaled that it would likely raise rates one more time this year, and it projected three more rate hikes in 2019.
The Fed fund futures contract expiring in January 2020, a heavily traded contract that reflects market expectations for where rates will be at the end of 2019, rallied sharply on record volume and pointed to an implied yield of 2.7 per cent.
Late last month he said he was very unhappy with the Fed because Obama had zero interest rates while he "maybe regrets nominating him to become the Fed chair." The S&P 500 rose 61.61 points, or 2.30 percent, to 2,743.78.
Trump further took aim at Powell in a Wall Street Journal interview on Monday that mainly dealt with the trade conflict with China.
"Many participants indicated that it might be appropriate at some upcoming meetings to begin to transition to statement language that placed greater emphasis on the evaluation of incoming data in assessing the economic and policy outlook", said the minutes.