This article was published by The McAlvany Intelligence Advisor on Friday, November 30, 2018:
With just two words – “just below” – Fed Chair Jerome Powell gave Wall Street what it was hoping to hear on Wednesday: a step back from his “we’re a long way from neutral” comments in early October. Wall Street finished the day higher by more than two percent. Here’s what Powell said that triggered the relief rally:
Interest rates are still low by historical standards, and they remain just below [emphasis added] the broad range of estimates of the level that would be neutral for the economy – that is, neither speeding up nor slowing down growth.
That’s a very long way from his previous comments that took 2,500 points off the Dow in the weeks following their issuance.
Nearly all the conversation was about Powell’s words, which were, according to Robert Pavlik, chief investment officer at SlateStone Wealth, “exactly what the market was expecting to hear. Obviously it has to do with the market reaction to his previous comments. He had to walk [them] back.”
There was much discussion over just what he meant by “neutral.” Two weeks ago, Charles Evans, the president of the Chicago Federal Reserve Bank who also sits on the Fed’s Federal Open Market Committee, didn’t know what “neutral” meant: