Federal Reserve is flexible and aware of risks, says Powell

US stocks rally after strong jobs data, dovish Fed comments

Currently, the USA inflation rate remains below what the Fed considers an optimal 2 percent level, meaning there is still space for economic expansion and workers are just beginning to benefit from the growth.

While Trump has sent out a number of tweets criticizing Powell and calling the Fed the biggest threat to the economy, Powell said that he had not received any direct pressure from the White House.

Shortly after a bullish jobs report for December sparked a small rally in the ailing stock market, Fed Chairman Jerome Powell ignited an even stronger surge after he delivered just what the doctor ordered - that the Fed will be flexible on monetary policy and it is in no rush to raise interest rates.

Employment data showed the USA added 312,000 jobs in December, much above analyst expectations, strengthening the case of those who have argued that markets have overreacted to signs that United States growth may have peaked.

The Fed raised its benchmark interest rate four times in 2018, with the latest announced on December 19, when Powell said his institution's policy decisions are "not on a preset course".

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"Despite this dovish tone, we are sceptical", Schenker said in a note. The Dow Jones industrial average was up around 700 points near the close.

However, after weeks of volatility in the bonds and stock market, Powell appeared to be more cautious regarding the choice of words while making the statement and he seemed to be sympathetic, as he had been quoted saying that the Fed was listening to the market outcry and they would balance the flow of strong economic data against the risks.

"This seemed like a pretty well-coordinated message", said Julia Coronado, president of Macropolicy Perspectives LLC in NY.

Trump has for months criticized the Fed chief for raising rates, and Bloomberg News reported December 21 that the president had discussed firing Powell. That suggests the Fed won't tighten again in March, she said.

Powell on Friday stressed that the Fed was prepared to adjust the pace at which it trimmed the balance sheet if necessary to support economic growth.

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The president's attacks had become so intense that they had raised concerns that he might be considering firing Powell, a development which could send the market into a tailspin. "If we ever came to the conclusion that any aspect of our plans" was part of a problem, "we wouldn't hesitate to change it".

Asked if he would resign if Trump asked him to do so, Powell responded with a short "no".

Friday's event offered a rare show of public unity by a sitting Fed chairman and his two immediate predecessors, who were asked about Trump's apparent disregard for the institution's independence.

Yellen, the Fed chair from 2014 to 2018 before Trump replaced her with Powell last February, said: "Obviously, the president has the right to comment on the Fed, but I would worry that if it continues or intensifies that it could undermine confidence in the Fed - and the market confidence in the Fed's judgment".

This story has been published from a wire agency feed without modifications to the text.

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