The Federal On call is “closely monitoring” the coronavirus, its impact on China and the effect that it could have on global economic growth, Chairman Jerome Powell chance Tuesday.
In his semiannual testimony before Congress, Powell said the new threat comes just as trade uncertainties participate in diminished, though the U.S. economy appears “resilient” to global headwinds.
Despite the threat from the virus, he said Fed scheme is well positioned after a series of rate cuts in 2019.
“As long as incoming information about the economy remains broadly constant with this outlook, the current stance of monetary policy will likely remain appropriate,” he said.
He did, while, express some misgivings about rates being so low, not only with his own Fed but in other central banks around the set. The Fed last year held a series of public hearings to discuss policy options in the future, in particular how to handle cost-effective downturns.
“This low interest rate environment may limit the ability of central banks to reduce policy interest figures enough to support the economy during a downturn,” he said.
Powell’s remarks recapped the Fed’s 61-page semiannual report that lawmakers pull down on Friday. He said the economy is growing at a “moderate” pace, and he noted that the fundamentals supporting household spending are soundless “solid.”
Markets reacted little to the remarks, which strongly resembled the messages coming from Powell and his swain officials over the past several months. Wall Street was indicating a 100-point Dow industrials gain at the unincumbered.
“Interest rates aren’t going up under his watch without more inflation and that is music to the stock trade in’s ears,” said Chris Rupkey, chief financial economist at MUFG Union Bank.
Talks jobs exchange, budget
Powell also highlighted the strong gains in the labor market. He pointed to the large number of job openings and guessed employers are more willing to hire and train workers with fewer skills.
“As a result, the benefits of a strong labor supermarket have become more widely shared,” Powell said. “People who live and work in low- and middle-income communities are decree new opportunities.”
Powell cited two long-run challenges to the economy in his testimony: the low labor force participation rate and productivity gains. He also weighed in on the federal budget, arguing that lawmakers should sheave ballooning deficits and the national debt while the economy is strong to provide more room to react during the next downturn.
“A more sustainable federal budget could also strengthen the economy’s growth over the long term,” he said.
Powell’s appearance before the House Financial Services Board begins at 10 a.m. ET and follows a year in which the Fed made a sharp pivot, going from a series of steady gauge hikes with more on tap ahead to cuts and a general easing in monetary policy.
The policymaking Federal Open Hawk Committee most recently has held the line on further moves.
In addition to the wait-and-see approach on rates, the Fed has continued its constantly liquidity injections into the overnight lending, or repo, market where banks get their short-term funding. Officials have in the offing said the operations will last through the second quarter as the Fed continues to calibrate the amount of reserves the banking organization needs to operate comfortably.
In his speech, Powell called the use of repo a technical measure and not a change in monetary policy, in defiance of the rally in risk assets that has come along with the balance sheet expansion.
Powell and his fellow policymakers from been under intense pressure from President Donald Trump to continue to cut rates, but they have demanded with little dissent that it would take something substantial to make them move in either operation.
However, markets are expecting more easing, with a rate cut by September priced in already and futures traders also exhibiting about a 46% chance of another move in December.
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