Fed chair Jerome Powell to speak on market concerns Thursday

Irving Hamilton
January 11, 2019

Speaking at the Economic Club of Washington, Powell reiterated that the USA central bank has the ability to be patient on monetary policy given stable price measures.

The head of the Federal Reserve also warned that while his department has no official projection on the current government shutdown, it can still have a damaging effect on the national economy.

In an interview at the Economic Club of Washington, Powell echoed other Fed officials' comments and said inflation was low, and under control, and that the central bank could afford to be patient and flexible with its monetary policy going forward.

"There is no such plan", Powell said.

While most previous shutdowns have been fairly short and have not affected the economy in the aggregate, Mr Powell said, "if we have an extended shutdown, I think that would show up in the data pretty clearly".

"There are some who seem determined to talk us into a downturn", Thomas J. Donohue, president of the US Chamber, said in a speech Thursday.

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.

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Pompeo's tour is aimed at urging regional allies to continue to confront the "significant threats" posed by Iran and militants. His easy mission will be to persuade these nations that the Trump administration remains committed to neutralizing Iran.

Clarida is the latest USA central banker to refine the Fed's monetary message after the hawkish tone of their December 19 statement and forecasts for further rate hikes in 2019 roiled financial markets. The Fed's communications - and a Bloomberg News report that President Donald Trump had discussed firing Powell - helping bring on the worst December for stocks since the Great Depression. 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 USA economy.

He downplayed predictions from policymakers suggesting interest rates would be raised twice more this year.

At the same time, Powell acknowledged that financial markets are expressing concern about risks. "The principal worry I would have is global growth".

Powell seemed open to, though not enthusiastic, about a potential meeting with Trump.

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.

"The U.S. economy is solid", Mr. Powell said.

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