Investing.com – Federal Reserve Jerome Powell said the Fed will start expanding its balance sheet "soon" in response to funding issues and continued to suggest the economy remained on solid footing, with inflation firming over the past few months.
Powell said the central bank “will soon announce measures to add to the supply of reserves over time,” to proving liquidity in the repo market. This comes after a lack of funding saw repo rates spike as high as 10%, pushing the Fed’s benchmark funds rate above its targeted range by 5 basis points. He stressed that the move was not quantitative easing.
- The Federal Open Market Committee continues to “see sustained expansion of economic activity,” but admitted there are risks to this favorable outlook, principally from global developments amid uncertainties around trade, Brexit, and other issues, Powell said.
- Powell reiterated the central bank “will act as appropriate” to support continued growth, a strong job market, and inflation moving back to the symmetric 2% target.
- The Fed chief also said that the impact on the economy of higher oil prices would still cause “dislocations and hardship for many, but with exports and imports nearly balanced, the higher price paid by consumers is roughly offset by higher earnings of workers and firms in the U.S. oil industry.”
- The S&P 500 pared losses after Powell's remarks.