US FEDERAL Reserve chairman Jerome Powell gave investors a strong dose of optimism on Wednesday, saying that the central bank's policy rate is now "just below" estimates of a level that neither brakes nor boosts a healthy US economy.
The Dow Jones Industrial Average surged more than 600 points, or 2.5%, to 25,366.43, while the broader S&P 500 index rose 2.28% to 2,743.43. Powell said he and other policy makers continue to see a "solid" outlook for the USA economy, while noting that interest rates are "just below" the so-called neutral range.
Powell said "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 stood in contrast with comments Powell had made in October when he said that the Fed's policy rate was still a "long way from neutral".
The Fed members' comments initially appeared to comfort investors.
The Fed chairman also said Wednesday that while some corporate debt loads have reached riskier levels, "we do not see unsafe excesses in the stock market".
While markets still expect a rate hike in December, Mr Powell said, "there is no preset policy path". But that doesn't mean rates won't rise further, as most officials said another rate increase was likely, perhaps as soon as next month.
The rate increases have gradually raised borrowing costs for consumers and businesses. "Our gradual pace of raising interest rates has been an exercise in balancing risks".
US President Donald Trump has repeatedly slammed the Fed chair for raising rates too often. Critics have expressed worry that the president's attacks threaten the Fed's ability to operate free of political pressure.
The central bank chief said his colleagues and many other economists "are forecasting continued solid growth, low unemployment and inflation near 2 per cent".
Analysts read that as a suggestion that Powell intends to be more cautious about hikes in rates.
Asked about GM's layoffs and recent declines on Wall Street, Trump laid the blame on Powell.
The chairman added that the Fed regards no major asset class as significantly inflated, "as some did, for example, in the late 1990s dot-com boom or the pre-crisis credit boom". Those trends, he said, were coinciding with inflation remaining "right on target" at the Fed's goal of 2 per cent annual price increases.
And some economists say the markets misread Powell. 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.
The minutes did raise a number of worries about Trump's get-tough trade policies, which have levied tariffs on billions of dollars worth of imports from China and other countries and prompted retaliation against USA products.
The speech was focused on stability in the financial system, and Powell cited four potential vulnerabilities for the economy, including excessive leverage and debt loads in some sectors.
He noted that unexpected events can trigger recessions, but "I don't know what it will be" that might halt the current expansion. At that time, Fed policymakers indicated another hike in December, three more in 2019 and probably one more in 2020.
The markets have been shaken by Powell's hawkish tone and insistence that rates would increase in the face of a bright economic outlook.