Economy

What Powell is saying

What Powell is saying”

The speech reinforces comments by other policy makers this month that the Fed is likely to keep interest rates on hold through at least March following four hikes in 2018.

James Bullard, president of the St Louis Federal Reserve Bank, one of 12 in the Fed system and a voting member of the policy committee this year, called the current interest rate "a good level", in an interview with the Wall Street Journal.

Powell's second appearance in less than a week generated a subdued response in financial markets, a sign he may have found his footing in how to describe central bank policy without surprising investors.

The central bank's vice chairman, Richard Clarida, said later on Thursday that if the global slowdown and tightening of financial markets persists, the Fed would take policy steps to offset that.

Asked what qualifies for "normal", Powell said "I don't know the exact level."He noted that the balance sheet has declined to about $4 trillion, but that before the 2008 crisis it was below $1 trillion".

"The U.S. economy is solid", Mr. Powell said. Those forecasts appear supported by a robust December labor-market report, which showed the economy added 312,000 non-farm jobs, the most in 10 months.

Powell's comments on Fed patience were similar to the message in the minutes of the Fed's December meeting as well as the comments of other Fed officials this week.

The US central bank raised rates four times a year ago in the face of robust economic growth and unemployment that touched its lowest level in half a century.

Fed officials and many forecasters expect growth to slow in 2019, but to remain strong enough to continue generating jobs and keeping the unemployment rate near its nearly 50-year low.

Powell also said he didn't see signs of a recession in the near term, but noted that his "principal worry" was a slowdown in global growth and that while the United States economy appears "solid", a slowdown in China "is a concern". If conditions weaken, the Fed would react.

The partial government shutdown is unlikely to leave a mark on the economy in the short term, though the Fed will have a less clear picture of growth without data from the Commerce Department, which releases figures including retail sales and gross domestic product.

"There is no pre-set path for rates. particularly now", he said.

"We're in a place where we can be patient and flexible and wait and see what does evolve, and I think for the meantime we're waiting and watching", Powell said in a question-and-answer session Thursday at the Economic Club of Washington, D.C.



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