Shares - Wall Road Flies Excessive on Fed Persistence, Job Features

A street sign Wall Street is seen outside New York Stock Exchange in New York City New York

A street sign Wall Street is seen outside New York Stock Exchange in New York City New York

Both of those messages cheered stock market investors who had been anxious about Trump's repeated attacks on his hand-picked choice to lead the nation's central bank and also the Fed's seemingly inexorable march to higher rates.

He has blamed the Fed for stock market declines and said he is "not even a little bit happy" with Mr Powell, whom he named to lead the Fed in 2017.

"If the president asked you to resign, would you do it?" the moderator asked Powell.

Earlier on Friday, the Labor Department reported that nonfarm payrolls jumped by 312,000 jobs, well above market expectations, while wages and labor force participation rose, all signals of sustained economic strength. "We're listening sensitively to the message that markets are sending".

Powell triggered an additional surge in the markets after he walked back the comment made in December that shook up investors and made him sound like his sole mission was to reduce the central bank's balance sheet.

He also said the Fed is "not on a preset path of tightening policy and suggesting it could pause rate hikes as it did in 2016". "Can we wait?", Cleveland Federal Reserve Bank President Loretta Mester said in an interview with Reuters.

"That's quite welcome", Powell said.

Powell called the December jobs report "very strong" and said USA data seems "to be on track to sustain good momentum into the new year".

It wasn't just the Fed chairman's observations about the potential for rate hikes in 2019 that had investors buying, but assurances about Powell's job security in the face of increasing pressure from President Trump. "But what I do know is that we will be prepared to adjust policy quickly and flexibly and to use all of our tools to support the economy should that be appropriate to keep the expansion on track". He discussed the state of the economy with former Federal Reserve Chief's Janet Yellen and Ben Bernanke.

Trade uncertainty and concerns about global growth seem to be an important factor in the recent USA weakness: tariff worries have surfaced repeatedly in Fed surveys. But some investors have anxious that that process could push long-term rates higher at a time when the economy was slowing.

Still, with unemployment at 3.7 percent, some economists caution that inflation could move higher if labor shortages begin to bite - that's partly why the Fed hiked rate four times a year ago. The Fed increased its balance sheet to a peak of around $4.5 trillion before it ended the QE program but continued reinvesting the proceeds from maturing bonds. Asked if he had had any face-to-face meetings with Trump, Powell said he had not although he said previous Fed leaders have had discussions from time to time with previous presidents.

Asked if any future meeting with Trump was scheduled, Powell said, "I have no news on that".

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