US Fed chairman Powell hints at higher rates following Trump attack

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US Fed chairman Powell hints at higher rates following Trump attack

A day after President Donald Trump's latest attack on the U.S. central bank, Federal Reserve chief Jerome Powell hinted Wednesday the key lending rate would move higher but said there was no preset course. Jerome Powell's speech essentially said the economy is doing well, and asset prices are not in a bubble, but that rates are close to "neutral" although people dispute what that is, according to Nicholas Frappell, global general manager at Sydney-based ABC Bullion.

The Fed's dot plot implies three interest rate hikes in 2019. But signs of a slowdown overseas and almost two months of market volatility - including a sharp selloff last week - have clouded an otherwise mostly rosy US picture in which the economy is growing well above potential and unemployment is the lowest since the 1960s.

"The 10-year note is perched at a critical level", said Chris Ahrens, chief market strategist at First Empire Securities in Hauppauge, New York.

The Bloomberg Dollar Index sank the most in two weeks, fueling speculation its two-month rally may be over.

The benchmark 10-year bond yield was at 7.60 per cent by 0340 GMT or 9:10 am IST, down 4 basis points on the day and at its lowest level since May 8.

Sterling was last trading at $1.2784, down 0.31 percent on the day, after Bank of England Governor Mark Carney warned a disorderly Brexit could trigger a worse economic downturn for Britain than the financial crisis.

The Fed chief said in his speech that interest rates remain "low by historical standards" and still provide stimulus to the economy.

Still, some say the Fed will continue hiking.

Global equity bulls were instilled with a renewed sense of inspiration on Thursday after dovish remarks from Federal Reserve Chair Jerome Powell boosted risk appetite. "Now investors are true believers - and are reacting accordingly".

Powell has dismissed the unprecedented political attacks from Trump, saying they have no influence on deliberations of the independent central bank.

"If Trump were able to get those additional concessions from China at this meeting, and announce certainly no trade deal, but. a commitment to further negotiations to work towards a deal and in the interim not see further escalation, then that's something markets would latch onto", Page added.

Terminal subscribers can read our Markets Live blog.

Gold watchers will be placing a keen eye on the outcome of the G20 summit, particularly on the reports emerging from the President Trump and Xi meeting.

Wall Street was set for a weaker open with S&P 500 and Nasdaq futures down 0.2 to 0.5 percent after Trump struck an uncompromising tone on trade. NY time, the biggest three-day gain since June.

For the week, the Dow rose 5.16 percent, registering its biggest one-week gains since November 2016.

US crude rose 2.31 percent to $51.45 per barrel and Brent closed at $59.51, up 1.28 percent on the day.

The Stoxx Europe 600 Index was little changed.

The dollar index against a basket of six major currencies was effectively flat at 96.805 following an overnight loss of 0.6 percent.

The euro was up 0.7 percent to Dollars 1.1367.

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