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Federal Reserve Board Chairman Jerome Powell holds a news conference after a Federal Open Market Committee meeting in Washington, DC, December 19, 2018.
Federal Reserve chairman Jerome Powell made his comments on Wednesday following the Federal Reserve’s decision to hike interest rates.
This week’s interest hike brings the Fed closer to what it considers a neutral level, Chairman Jerome Powell said Wednesday.
Speaking the same day the central bank approved a quarter-point increase to its benchmark rate, Powell addressed how close the Fed is to a rate that is neither restrictive nor stimulative.
“Where we are right now is the lower end of neutral,” he said during a news conference at the conclusion of the two-day Federal Open Market Committee meeting. “There are implications for that.”
Statements Powell made over the past several months about the neutral rate have caused sharp market fluctuations.
In early October, the chairman said the Fed was “a long way” from neutral. The statement coincided with the beginning of a rough wave of volatility that has sent major stock market averages into correction territory.
Then in November, he addressed the issue again, saying the current funds rate was “just below” the range of projections that individual FOMC members had for the neutral level.
Asked Wednesday whether his ideas had changed about neutral, Powell said policy making is an evolving process.
“Monetary policymaking is a forward-looking exercise, and I’m just going to stick with that,” he said.
“There’s real uncertainty about the pace and the destination of further rate increases, and we’re going to be letting incoming data inform our thinking about the appropriate path,” Powell added.
With the hike, announced Wednesday, the funds rate is now targeted between 2.25 percent and 2.5 percent. The range of neutral estimates from committee members is around 2.5 percent and 3.5 percent.