Stocks see-saw as Fed chair gets grilled by Congress again

Stocks see-saw as Fed chair gets grilled by Congress again

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.

Earlier in the session, the dollar hit a six-week high after a set of solid US economic data stoked expectations of four rate hikes by the Fed.

Powell replaced Janet Yellen as Fed chairman about three weeks ago and was immediately tested by turmoil in the stock market.

Powell also said he doesn't see a tightening labour market causing wages to hit "a point of acceleration".

Powell added that he expects to see wage inflation soon.

Consumer spending, which accounts for more than two-thirds of USA economic activity, gained 0.2 percent in January, while core PCE price index, the Federal Reserve's favored gauge on inflation, rose 0.2 percent compared with economists' expectation of a 0.3 percent rise.

Powell will speak in the late morning before the Senate Finance Committee.

He said the Fed was in a "process of discovering" how low unemployment could fall before inflation took hold.

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In his testimony before the House Financial Services Committee on Tuesday, Powell said that his outlook for the economy has strengthened since December last year, triggering market speculation that the Fed chair was open to faster interest rate hikes this year.

Benchmark U.S. crude rose 14 cents to $61.13 a barrel in electronic trading on the New York Mercantile Exchange. "That's a problem given that, in the last four downturns, the Fed has cut rates by an average of 5.5 percentage points to stimulate renewed growth".

The Mexican peso lost 0.29 percent versus the USA dollar at 18.89, while the Canadian dollar fell 0.39 percent versus the greenback at 1.29 per dollar. Powell, a Republican, has been on the Fed's seven-member board since 2012.

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.

In his second congressional testimony, Powell also said there is no evidence the USA economy is now overheating, weakening the case for faster interest rates. The Commerce Department data showed nominal consumer spending grew 0.2 percent in January, matching the median forecast in a Bloomberg survey, and following a 0.4 percent gain. Powell has also voiced his opposition to a strict monetary rule but in his testimony he noted that the Fed "routinely consults monetary policy rules" to use as guidelines in setting policy. "I would not want to presume policies away from our mandate", Powell said.

US consumer prices increased in January as a gauge of underlying inflation posting its largest gain in 12 months, but a survey showed the euro zone's factory boom slowed a little further in February, pressuring euro zone yields lower.

Rather, "the robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in USA exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment", he said.

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