“The market was clearly expecting them to have a rate hike. That was priced into the bond market and into the Fed funds market,” Mnuchin said. “I think that the market was disappointed in the chairman’s comments.”
But Mnuchin said he was looking beyond the prediction of two more rate hikes, and pointed to the interest rate forecasts outlined by Fed officials in its “dot plot.”
“There’s clearly people on the committee who think that they don’t need to raise rates much here, and I think you’ve got to put this in perspective. We’ve had 5 and 6 percent interest rates. The Fed has said they are close to done. [Powell] said they are data dependent,” Mnuchin said. “I think the market has overreacted, and U.S. equities are a tremendous value.”
Mnuchin said he was “still optimistic” that the U.S. economy would grow at 3 percent in 2019, but he pointed to the Fed’s projection on inflation as “really the more important issue” for the stock market.
“The Fed lowered their expectation for inflation, which is a good thing. We’ve seen inflation come down, we’ve seen the oil markets come down. So I think you’re looking at a very attractive investment market for the next year,” he said.