Federal Reserve Chairman Jerome Powell on Friday moved to ease concerns in financial markets, saying that while USA economic momentum is solid, the central bank is sensitive to the risks highlighted by investors and will be patient with its monetary policy in 2019.
On December 19, the Federal Reserve increased the interest rate for the fourth time in 2018 - from 2.25 percent to 2.5 percent.
US President Donald Trump has been one of the loudest critics of the rising rates, which raise the cost of borrowing and risk dampening economic growth.
The Dow Jones Industrial Average exploded by as much as 700 points after Federal Reserve Chairman Jerome Powell reassured investors that the central bank would pay attention to market conditions before implementing interest rate hikes.
On Friday, the Labor Department reported the U.S. added 312,000 jobs in December, much above analyst expectations.
"The markets are feeling better that the Fed is not strangling the overall economy and perhaps forcing it into a recession, and that removes a monetary policy concern that has been hanging over the market for the past few months", said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC.
The next meeting of the Federal Open Market Committee is set for January 29-30, and Powell plans to hold a press conference after that gathering as he will after each FOMC meeting going forward. The Labor Department report also showed an improvement in wages.
The head of the Fed, once confirmed by the Senate, can only be removed "for cause", not a policy disagreement. That suggests the Fed won't tighten again in March, she said.
Powell's remarks reassured investors who have anxious the Fed might raise rates excessively, but Jason Schenker of Prestige Economics suggested the Fed could.
Powell, who was appointed by Trump, also said he had not received any direct word from the White House about his job performance, and that no meeting with the president had been scheduled.
Powell on Friday stressed that the Fed was prepared to adjust the pace at which it trimmed the balance sheet if necessary to support economic growth.
Her comments, from a sometimes hawkish Fed official, highlighted the change in tone at a central bank that, after two years of roughly quarterly rate increases, was now assessing the risks of going too far.