Powell: Fed can be patient as United States economy evolves in 2019

Marco Green
January 11, 2019

But Fed Chairman Jerome Powell also sought to reassure financial markets last week, saying policymakers will be "patient" before making any further moves as they watch to see how the economy evolves and could react quickly to any changes.

He also said that the Fed had no preset path for rate hikes and would be "patient" when determining whether to hike interest rates further in response to strong US growth that risks sparking inflation, or to pause rate hikes to account for a global economic slowdown. "We're waiting and watching".

Powell said that he had never met Trump before he was interviewed by the president in late 2017 for the Fed chairman's job. The Fed cut the rate to nearly zero during the financial crisis but has since raised it to a "neutral" level, meant to neither stimulate nor constrain the economy.

Speaking to an audience in Washington, D.C, Powell delivered the same reassuring message that bolstered markets last Friday. However, many economists believe the Fed may end up raising rates only once in 2019, and that solo rate hike may not occur until the middle of the year. Minutes of the December meeting released on Wednesday showed that many officials felt the central bank "could afford to be patient about further policy firming", indicating the Fed could place interest rates on hold through March or longer as it waits for clarity on risks to global growth that could affect the US economy.

The balance sheet "will be substantially smaller than it is now", though bigger than it was before the crisis, Powell said. Bloomberg's financial conditions index has retraced much of its December tightening.

The Fed chief was also asked about the partial United States government shutdown.

"Financial markets are expressing a view of concern about downside risks associated with global growth and with trade", Powell said.

The S&P 500 is up over 10 percent from a 20-month low it touched around Christmas, lifted by hopes for a US-Chinese trade deal, which eased some worries over the impact of the dispute on global growth. Rubenstein also hosts an interview show on Bloomberg Television.

Powell said, for now, there is no evidence suggesting an elevated possibility of a recession.

The central bank's quarterly forecast in December showed Fed officials still expect two more increases in 2019.

He agreed with the prevailing view of the USA economy slowing to around 2.25-2.5 per cent this year, with unemployment holding around the current 3.9 per cent.

The officials pledged to continue to monitor financial markets for signals about potential risks.

Other reports by Click Lancashire

Discuss This Article

FOLLOW OUR NEWSPAPER