Fed minutes: Further hike 'warranted soon,' debate opened on pause

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The Fed cut rates to zero in 2008 during the global financial crisis but has been raising them since the end of 2015 and is expected to announce another increase next month.

Policymakers had provisionally pencilled in three quarter-point rate increases for next year, according to the median of forecasts released in September's so-called dot plot.

To that end, Trump, who chose Powell to replace former Fed chief Janet Yellen, has often bashed him and the Fed on Twitter and in interviews for the rate hikes.

The minutes said that such a change would help to convey "the Committee's flexible approach in responding to changing economic circumstances", while market supposed that this could indicate possible changes for the Fed's rate hike decisions in 2019. "We also know that moving too slowly - keeping interest rates too low for too long - could risk other distortions in the form of higher inflation".

Here's the key line from Powell investors latched onto: "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's speech indicated that he is listening.

"Powell said nothing to suggest that he or the majority of the FOMC think they'll be able to stop at the bottom of the range, after just one more hike", said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

While markets still expect a rate hike in December, Mr Powell said, "there is no preset policy path".

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Those comments followed a series of public attacks on the chairman of the Fed, a position that, while appointed by the president, is supposed to enjoy political independence. Still, "this dovish Fed lean is a fantastic cure-all for what ails stock markets sentiment".

While the speech had "cleaned up after Powell's sloppy language last month", markets may have reacted too strongly to the comments, said Ed Al-Hussainy, senior rates analyst at Columbia Threadneedle Investments.

In remarks delivered Wednesday in New York, Fed chairman Jerome Powell uttered words that set Wall Street on fire.

"My own assessment is that, while risks are above normal in some areas and below normal in others, overall financial stability vulnerabilities are at a moderate level", he said.

In an appearance earlier this month, Powell cited strong annual economic growth above 3 per cent and unemployment at a near five-decade low of 3.7 per cent. Stocks plummeted in response.

"Many baby boomers like me are, however, reaching an age where a good report is, 'Well, there are a number of things we should keep an eye on, but all things considered you are in good health, '" said Powell. Stocks swooned as investors bet the USA central bank would need more rate hikes to prevent the economy from overheating.

Factually, Powell's remarks on Wednesday and in October are both true.

The rate hike likely coming on December 19 would raise the benchmark lending rate, which influences borrowing costs throughout the wider economy, to 2.5 per cent. But some economists say three rate increases for next year are beginning to look less certain. He tried to dismiss as premature questions over whether the Fed would need to raise rates above neutral to a level aimed at slowing growth.