The upcoming interest rate decision-which will come December 19- will serve as a big signal for both the Fed's conviction for continued economic growth as well as the equity market's resilience to yet another hike.
He told an audience in NY on Wednesday, "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". He also noted that the economy had yet to feel the full impact of the hikes.
Powell's dovish comments mean the probability of accelerated pace of rate increases in the United States is rather low, and that should burnish the appeal of all emerging market assets.
Policy makers provisionally penciled in three quarter-percentage-point rate increases for next year, according to the median of forecasts released in September's so-called dot plot.
Investors say a sustained market rally following the summit would hinge on there being substantive concessions from Trump, in particular whether Xi can persuade Trump to postpone a sharp tariff hike on Chinese goods due to take effect January 1.
Joblessness stood at 3.7% in October, well below the rate the Fed sees as sustainable in the longer run.
"Given the volatility you've seen recently, it's probably quite reasonable to expect a little bit of a bounce".
The S&P 500 Index rose the most since March, while yields on two-year Treasuries fell 2 basis points, as traders dialed back their expectations for interest-rate hikes. The mere hint of fewer rate hikes in 2019 was enough to ebb the stock sell-off for at least one day last week. Its removal would flag a possible pause in roughly quarterly hikes that had been expected to continue through 2019, without committing the central bank to moving or not moving at any particular meeting. "There is a great deal to like about this outlook, " he said in a speech to the Economic Club of NY.
He did not specifically cite the criticism he has faced from the White House, but he defended the Fed's recent moves and said "there is no preset policy path".
That "just below" phrasing seemed to indicate that the Fed is almost done raising rates for the time being.
Economists are divided about what the Fed will do beyond December. Bloomberg Economics anticipates three increases.
His renewed focus on the "neutral" level of interest rates as a potential turning point for policy that until now has been on a steady tightening path is echoed by the minutes.
Nearly all Fed officials at the meeting agreed another interest rate increase was "likely to be warranted fairly soon", but also opened debate on when to pause further hikes and how to relay those plans to the public.
Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, told clients that he thought the markets overreacted to "the somewhat more dovish tone" of the Fed chairman's speech.
Economists and investors have been scratching their heads this week over signals from the Federal Reserve, which left the future of USA monetary policy open to broadly divergent interpretations. But Powell's comments are prompting speculation among many investors that a looser policy may lie ahead. And they dumped stocks in response.
"We will be paying very close attention to what incoming economic and financial data are telling us". Rather, we assume that Powell wanted to prepare the markets for a change in the central bank's communication.