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Fed Chairman Powell: Interest Rates Currently "Just Below" Neutral

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In a highly anticipated speech before the Economic Club of New York on Wednesday, Federal Reserve Chairman Jerome Powell described the current level of interest rates as "just below" neutral following a series of rate hikes this year.

Powell noted the Fed began gradually raising interest rates from near-zero levels about three years ago as the economy improved.

The Fed has raised three times in 2018 to a range of 2 to 2.25 percent and has forecast another rate hike before the end of the year.

"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," Powell said.

The latest remarks seem to conflict with comments Powell made early last month, when he said rates were a "long way from neutral."

Powell also said the economy is close to achieving both of the Fed's objectives of promoting maximum employment and price stability.

The Fed Chief stressed rates are not on a "preset" path and said the central bank will pay very close attention to incoming data.

"As always, our decisions on monetary policy will be designed to keep the economy on track in light of the changing outlook for jobs and inflation," Powell said.

Ahead of Powell's remarks, President Donald Trump attacked the Fed Chairman in an interview with the Washington Post published late Tuesday.

Trump told the Washington Post he is "not even a little bit happy" with Powell, blaming the Fed for recent stock market weakness and General Motors' (GM) announcement of plant closures and layoffs.

"I'm doing deals, and I'm not being accommodated by the Fed," Trump said. "They're making a mistake because I have a gut, and my gut tells me more sometimes than anybody else's brain can ever tell me."

"So far, I'm not even a little bit happy with my selection of Jay. Not even a little bit," he added. "I think that the Fed is way off-base with what they're doing."

CME Group's FedWatch tool currently indicates an 82.7 percent chance the Fed will raise rates by another quarter point to a range of 2.25 to 2.50 percent at its monetary policy meeting next month.

Trump has repeatedly claimed the Fed is raising rates too aggressively considering recent "very low" inflation numbers.

While Powell briefly spoke about interest rates in his opening remarks, the main subject of his speech was the profound transformation in the Fed's approach to monitoring and addressing financial stability since the Global Financial Crisis.

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