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Powell Says Policy Appropriate Amid Noteworthy Risks to Outlook

Stock Markets Nov 13, 2019 10:07AM ET
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© Reuters. Powell Says Policy Appropriate Amid Noteworthy Risks to Outlook

(Bloomberg) -- Federal Reserve Chairman Jerome Powell said the current stance of monetary policy is likely to be sufficient provided the economy stays on track, but warned that “noteworthy risks” remain to the record U.S. expansion.

“We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook,” Powell said Wednesday in remarks prepared for delivery to the congressional Joint Economic Committee in Washington. “However, noteworthy risks to this outlook remain.”

Powell, whose comments largely echoed his message on Oct. 30 after the Fed’s third rate cut this year, said slowing global growth and trade developments pose “ongoing risks.” He added that persistently low inflation could lead to an “unwelcome” slide in the public’s longer-run expectations of inflation.

Powell, who is scheduled to begin his appearance at 11 AM ET (16:00 GMT), said the Federal Open Market Committee cut the policy rate, which is now in a range of 1.5% to 1.75%, to support growth and move inflation back to the 2% target. He added that the committee was prepared to respond to a “material reassessment” of its outlook. The speech suggests the Fed chairman is still attentive to downside risks though policy makers would need to see an accumulation of data before changing rates again.

Powell and the Fed have been relentlessly criticized by President Donald Trump, who has blamed the central bank’s policies, rather than the U.S.-China trade war, for a slowdown in the U.S. economy as he ramps up his 2020 re-election campaign.

“We’re paying actually high interest. We should be paying by far the lowest interest,” Trump said Tuesday in New York, complaining that by shunning the negative interest rates deployed by other central banks, the Fed “puts us at a competitive disadvantage.”

U.S. economic data has continued to show strength among households and financial conditions have eased with stocks touching record highs on Wall Street this month. Consumer sentiment improved for a third month in November, according to the University of Michigan’s preliminary sentiment index, while employers added 128,000 new jobs in October. Powell said the Fed expected some easing in the pace of job gains after last year’s strong pace.

Manufacturing and business investment continue to lag. A gauge of U.S. manufacturing signaled the sector contracted for a third straight month with the weakest production level since the last recession.

“Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2% objective as most likely,” Powell said.

Powell Says Policy Appropriate Amid Noteworthy Risks to Outlook
 

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Comments (10)
Steven Chen
Gamer_LG Nov 13, 2019 12:59PM ET
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big elephant in the room was the QE till end of Q2 2020. we undo 3 out of past 6 hikes and balance sheet to go near 4.5T again. 12 year expansion yet can't shrink balance sheet or reduce deficit. amazing economy
Hank Williams
Hank Williams Nov 13, 2019 12:54PM ET
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Everything that is happening today is still an effect of the 2008 wealthy bail out. The effects of the great depression lasted quite a while and it was just a spec compared to the volumes and amounts being transferred today.
Peter Dikeakos
Peter Dikeakos Nov 13, 2019 12:13PM ET
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That means: The goose that laid the golden egg is succumbing to old age.
Graham Hart
Graham Hart Nov 13, 2019 11:23AM ET
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real interest rates are already negative if you measure inflation. and inflation is going to get incredibly bad..this is not sustainable. they pretend that all is well and they are waiting for more data to come in. Trust me, they have the data. otherwise they wouldn't have cut 3x in a row. A lot of people have cried wolf for years but I'm telling you the wolf is already amongst us.
joe balone
joe balone Nov 13, 2019 10:41AM ET
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So sell out now for a quick inflated stock market and sacrifice our children's future , sounds smart.
Robert Cox
Robert Cox Nov 13, 2019 10:40AM ET
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It makes zero sense to cut interest rates in a strong economy. While the markets may be ignoring that logic since the markets love cheap money, I wonder what the FOMC sees on the horizon that would justify such changes. After all, our interest rates were nowhere near pre-recession levels.
peter neal
peter neal Nov 13, 2019 10:40AM ET
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It see the equity market and it has to respond to it to keep it propped up. That's all.
Andrew carson
Andrew carson Nov 13, 2019 10:40AM ET
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Was a strong economy.
Joshua Devinney
Joshua Devinney Nov 13, 2019 10:34AM ET
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let's just stop fracking and pay more tariffs, good play Warren
Jeff Paper
Jeff Paper Nov 13, 2019 10:32AM ET
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Can someone explain to me why the Fed wants inflation? I am new to all of this, so I don't see how devaluation of our money is good. If I have $100 and the next year it is only worth $98 how can the be good. Why would I want to keep cash in this case instead of Au/Ag?
Nico Brunetti
NicoB Nov 13, 2019 10:32AM ET
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Because if you have 100$ that you know will be of 98$ value next year (-2%) you'd rather invest those 100$ for a return of 5% to increase its value, hence, keep money invested in the system. Otherwise you'd prefer to save them with a return of 2% and the money flow would slow, hence less economy expansions
Bo TR
Bo TR Nov 13, 2019 10:32AM ET
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Nico Brunetti  crystal clear sir
Steven Chen
Gamer_LG Nov 13, 2019 10:32AM ET
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Google why inflation is necessary.
Kristof Reekmans
Kristof Reekmans Nov 13, 2019 10:24AM ET
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Did he gave an explaination for the problems in the repo market?
James Choi
James Choi Nov 13, 2019 10:24AM ET
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I doubt he did and even if he did have an explanation it would be a lie.  Remember we were first told they were just being done for Q3 tax payments.
Delonte Crosby
Delonte Crosby Nov 13, 2019 10:15AM ET
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It's the trade war that is ****the economy. Stocks probably would have been high great heights if this deal would have gotten signed already.
joe balone
joe balone Nov 13, 2019 10:15AM ET
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So sell out now for a quick inflated stock market and sacrifice our children's future , sounds smart.
 
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