Dow spikes by 450 points as Fed head speaks on interest rates

Nov. 28, 2018 / 5:20 PM GMT

By Erik Sherman

The Dow Jones Industrial Average spiked by over 450 points on Wednesday as traders responded to comments from Federal Reserve Chairman Jerome “Jay” Powell in his first speech since President Donald Trump blamed the head of the central bank for the recent stock market sell-off.

In prepared remarks for a speech at the Economic Club of New York, Chairman Powell said there is no “pre-set policy path,” for interest rates, and focused on an economy that is “growing above trend.”

“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 said.

In an interview with the Washington Post published on Tuesday, Trump rounded on his choice for Fed chairman, saying, “So far, I’m not even a little bit happy with my selection of Jay.”

Powell has faced an unprecedented backlash from the president. The Fed is structured to be largely insulated from politics — and politicians largely have respected the organization and its officials in the past.

Trump claimed the Fed is “way off-base with what they’re doing,” in raising interest rates that were at historical lows following the financial meltdown that started in 2007. Low interest rates were deemed necessary to help the economy recover, but many economists have agreed that as things improve, interest rates need to rise to avoid inflation. Some experts disagree with the assessment and say the economy is not yet robust enough to eliminate support.

To date, Trump has indulged only in rhetoric, but there is a question of whether he might try to do more. Ordinarily, a member of the Fed’s board, including the chairman, cannot be removed from office by a sitting president other than for cause.