Federal Reserve Chairman Jerome Powell cast a bright picture of the US economy Wednesday and appeared to suggest that the Fed might consider a pause in its interest rate hikes next year to assess the impact of its credit tightening. Powell's comments ignited a rally on Wall Street, with the Dow surging more than 200 points after his remarks were released; it's up nearly 500 points as of this writing. Referring to the Fed's gradual increases in its benchmark rate, Powell said, "there is no preset policy path." Rather, he said, the Fed will assess the most recent economic and financial data in deciding whether or how fast to keep raising rates. The Fed has raised its benchmark short-term rate, now in a range of 2% to 2.25%, three times this year and is expected to do so again next month, reports the AP.
The chairman also suggested that interest rates appear to be just below the level the Fed calls "neutral," where they are thought to neither stimulate growth nor impede it. That contrasted with a remark Powell made in October that the Fed's policy rate was still well below neutral. That remark had unsettled investors who feared it signaled that the Fed would continue raising rates well into the coming months. Speaking to the Economic Club of New York, the Fed chairman also said that while some corporate debt loads have reached riskier levels, "we do not see dangerous excesses in the stock market." He added that the Fed regards no major asset class as significantly inflated, "as some did, for example, in the late 1990s dot-com boom or the pre-crisis credit boom." (Trump wasn't too pleased with Powell yesterday, though.)