The general consensus is that a rate hike in December will most certainly occur as the CME Group's FedWatch Tool, an algorithm that calculates the probability of a rate hike in a given month, is now showing an 82.7% chance the Federal Reserve will institute a fourth rate hike to end 2018. The president has blamed the Fed for the steep two-month fall in the stock market and the possibility that his efforts to boost growth with a major tax cut will be thwarted by rising interest rates.
The central bank expects the unemployment rate to remain historically low next year.
The current Federal Fund rate is 2.25 per cent, and there is a 77 per cent probability of a 25-basis point increase in the December meeting scheduled in the week before Christmas.
"Powell's dovish pivot reduces nagging concerns about vigorous interest rate hikes while providing the market with one of the best holiday gifts, a significant bounce in global equity markets", said Stephen Innes, head of Asia-Pacific trade at OANDA.
Nearly all participants at the November 7-8 meeting believed another rate increase "was likely to be warranted fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations", the minutes said.
The Fed members' comments initially appeared to comfort investors.
Just on Tuesday, Fed Vice Chair Richard Clarida, in a speech to numerous same economists and investors in NY, used precisely the same language to describe the policy rate as "just below" the range for neutral. "We continue to see the risks around economic growth skewed to the upside based on trends borne out in the data".
German police have raided Deutsche Bank headquarters
German investigators looking for evidence of possible money laundering have searched multiple offices belonging to Deutsche Bank. Police walk in front of Deutsche Bank headquarters in Frankfurt , Germany, on November 29, 2018 .
Minutes of the USA central bank's November 7-8 meeting showed "almost all participants" agreed that another rate hike would likely be necessary "fairly soon".
"Participants also commented on how the Committee's communications in its post-meeting statement might need to be revised at coming meetings, particularly the language referring to the Committee's expectations for "further gradual increases" in the target range for the federal funds rate", the minutes said.
"There is a lot of data to come between now and March, the most likely next opportunity for a rate hike". His emphasis on Wednesday suggested greater flexibility to stop sooner or move more slowly. And then wage growth is tepid. "You slow down. You maybe go a little less quickly".
Traders believe the risk of fast-rising interest rates hurting the U.S. economy and the stock market was now on the downside after Powell said monetary policy rate is now "just below" estimates of a level that neither brakes nor boosts a healthy economy.
Joblessness stood at 3.7% in October, well below the rate the Fed sees as sustainable in the longer run. Bloomberg Economics anticipates three increases.
October's Wall Street sell-off and a rise in bond yields tightened financial conditions while some sectors most sensitive to interest rates, such as the housing sector, had already begun to slow.
Analysts think a rate hike next month is likely, but economists admit three rate increases for next year are beginning to look less certain, especially if stock market volatility increases, and consumer and business sentiment worsens in early 2019.