Nov 28, 2018

Fed Chair Powell says interest rates now "just below" neutral level

Federal Reserve Chairman Jerome Powell. Photo: Alex Wong/Getty Images

Federal Reserve Chairman Jerome Powell said interest rates are "just below" the level that would neither promote nor restrict economic growth, according to a transcript of a speech he's set to give on Wednesday in New York.

"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."
— Federal Reserve Chairman Jerome Powell

Between the lines: Stocks jumped after the release of the speech, as investors assumed less rate hikes than originally anticipated will be necessary to get to the neutral level. This is a much less aggressive tone than Powell had in October, when he said in an interview with PBS that interest rates were "a long way from neutral."

Powell also addressed the Fed's first-ever "Financial Stability" report, released hours before Wednesday's speech:

  • He said that "overall financial stability vulnerabilities are at a moderate level," but also warned that high levels of corporate debt could "amplify" an economic downturn.
  • Powell added that he didn't "see vulnerabilities as elevated overall today in financial markets," and that equity prices are "broadly consistent with historical benchmarks."
  • The trade war, Brexit, and Italy's budget battle are among the risks Powell said could exacerbate stress to U.S. and global markets.

Go deeper: Jerome Powell's rough road

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Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. U.S. numbers include Americans extracted from Princess Cruise ship.

Two elderly Diamond Princess passengers have been killed by the novel coronavirus — the first deaths confirmed among the more than 600 infected aboard the cruise ship. South Korea also announced its first death Thursday.

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T-Mobile and Sprint announced a revised merger agreement that will see SoftBank getting a smaller share of the combined company, while most shareholders will receive the previously agreed upon exchange rate. The companies said they hope to get the deal as early as April 1.

Why it matters: The amended deal reflects the decline in Sprint's business, while leaving most shareholders' stake intact and removing another hurdle to the deal's closure.