Fed Chair Powell: No evidence of 'decisive' move up in wages

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The Fed's last round of economic projections in December pointed to three rate increases this year.

Stocks had mostly traded lower before Trump's announcement.

People walk on Wall Street in front of the New York Stock Exchange (NYSE) in New York, U.S., February 6, 2018.

Gold prices steadied on Wednesday after the previous session's more than 1 per cent fall following comments by the Federal Reserve's new chairman that fueled views the U.S. central bank would raise rates four times this year rather than three.

During the same testimony, Powell commented on the economy more broadly. The meeting of the rubber-stamp parliament's 3,000-plus delegates is mainly ceremonial but China's communist leaders use it to publicize new initiatives and set the tone for the year's development plans.

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Powell's appearance before the House panel was largely devoid of fireworks or friction, a contrast to some recent hearings in which FED chiefs have been grilled aggressively over the central bank's bond buying to fight the 2007-2009 financial crisis and the resulting massive swelling of its balance sheet.

Investors saw something to worry about in Powell's comments about rising inflation: They thought it made it more likely the Fed would increase rates faster.

The price data "will add to the sense that the weak patch in inflation is behind us", and "barring some kind of disaster, a March hike is pretty much a done deal", Feroli said. The Fed's preferred price gauge - tied to consumption - rose 0.4 percent in January from the previous month and was up 1.7 percent from a year earlier, according to the Commerce Department.

Shares of auto makers and other big consumers of steel and aluminum added to their session losses after Trump said the USA would impose tariffs of 25 percent on steel imports and 10 percent on imported aluminum next week, while shares of US steel and aluminum companies jumped. He says the modest increases in wages also showed that there is still slack in the job market.

Markets had plunged after Powell's initial testimony on Tuesday, when his first public remarks as Fed chair were marked by bullish comments on the USA economy. The U.S. unemployment rate is at a 17-year low of 4.1 percent. He is scheduled to testify on the same topic before the Senate Banking Committee on Thursday.

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Powell said risks are "more two-sided" now than early in the recovery, adding that "the thing we don't want to have happen is to get behind the curve". Market investors now expected that the Fed may raise interest rates four times this year in view of the stimulative fiscal policy, robust economic outlook and solid overseas growth.

In view of the strong labor market and the soft inflation, Powell reiterated that the central bank would continue to gradually tighten the monetary policy.

Powell said the USA economic outlook has strengthened since December, an appraisal that markets took as a sign the Fed could accelerate the pace of monetary tightening, with four interest rate hikes in 2018 rather than the three that were expected.

His comments on Tuesday sparked a jump in USA bond yields and a drop in US stocks as investors took his bullish statements about the economy as a signal the Fed would raise rates four times this year, as opposed to the three increases policymakers projected in December.

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