Shares rise on steady-as-it-goes line from Jackson Hole

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In his highly anticipated Friday address on the heels of a record-setting stock market week, Powell noted that while the US economy is strong, the Fed is working to find a balance between the "shoals of overheating and premature tightening".

St. Louis Federal Reserve President James Bullard said Friday that the central bank should hold off on rate hikes for the rest of 2018, while Cleveland Fed President Loretta Mester backed further increases.

Powell's remarks at Jackson Hole affirmed the Fed's plan to raise rates at least to neutral levels - a level which is neither expansionary nor contractionary. But Powell noted that there's a wide difference of opinion about it. The rate hikes are meant to prevent the economy from overheating and inflation from accelerating.

The Fed is expected to raise rates in September, perhaps again in December, and continue what it refers to as "normalization" into 2019.

"Congress understood this tension might exist between a central bank, which is responsible for the money supply, and those that have other angles in the economy", she said. We will win. But during this period of time, the Fed should give me some help, "he added".

". if the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate", he added.

Powell said the Fed was trying to balance two risks in its decisions on interest rates: "moving too fast and needlessly shortening the expansion, versus moving too slowly and risking a destabilizing overheating".

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"In the current state of the USA political system, that is dominated by doubts in the system of checks and balances, remnants of us dollar negativity remain", said Commerzbank analyst Ulrich Leuchtmann. "Guiding policy by the stars in practice, however, has been quite challenging of late because our best assessments of the location of the stars have been changing significantly", Powell said. "To return to the nautical metaphor, the FOMC has been navigating between the shoals of overheating and premature tightening with only a hazy view of what seem to be shifting navigational guides", Powell said.

Two decades later, Powell said, the situation had reversed. "That would fall in line with expectations and not cause much of a stir", said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.

"I see the current path of gradually raising interest rates as the [Federal Open Market Committee's] approach to taking seriously both of these risks", he said. "Inflation is near our 2 percent objective, and most people who want a job are finding one".

Experience has revealed two realities about the relation between inflation and unemployment...

The US sanctions on Iran are beginning to have a negative effect on crude exports from that country, even though they don't kick in until November.

The U.S. jobless rate is now 3.9 percent, well below the 5 percent target the Fed has considered the minimum level for stable prices.

Powell's careful comments aren't likely to convince Trump, who insiders say is concerned that a rate-driven economic slowdown could hit right as he's gearing up for a 2020 re-election campaign.