Powell repeats pledge to remain 'patient' with rate hikes

11 January, 2019, 14:24 | Author: Brooke Harris
  • US official warns of recession risk if interest rates go much higher

JPMorgan Chase has estimated that the partial government shutdown - which is 20 days old Thursday - is shaving $US1.5 billion off the economy each week, a modest amount in the context of a $US20 trillion economy, the damage will keep growing.

After four rate hikes a year ago, the Fed would be "bordering on going too far and possibly tipping the economy into recession" if rates go higher, Bullard said, adding that he would be willing to cut interest rates if needed.

In his remarks before the Economic Club of Washington, Powell described the economy as strong at the end of previous year, with the lowest unemployment levels in a half-century and solid gains in wages. There is good momentum going into this year. He said the Fed's aim was to return the balance sheet to a "more normal level" but didn't specify what that level will be.

"Growth prospects in other economies around the world have moderated somewhat in recent months, and overall financial conditions have tightened materially, " he said in the text of a speech late Thursday in NY.

"It will be substantially smaller than it is now", Powell said.

"I would expect them to repeat that the economy is strong", Scotiabank economist Derek Holt said.

But he noted that the economic data would also be muddied because the shutdown is impacting the Commerce Department, which operates the Bureau of Economic Analysis and the Census Bureau. And the Australian Bureau of statistics will released retail sales figures for November.

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"We do not take political factors into consideration in our discussions or decisions at all".

President Donald Trump has been a vocal critic of Powell.

"I'm not aware of any Fed chair turning down an invitation from the White House, nor do I think that would be appropriate", Powell said.

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

One of the principal goals of Powell's appearance was to continue to reassure markets that the Fed would not act rashly when raising rates and to communicate that the central bankers are closely monitoring the economy and markets. Echoing remarks by Chairman Jerome Powell earlier in the day, Clarida said the Fed can afford to be patient in determining its monetary stance. "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 chief will be in focus again this afternoon as he fields questions at the Economic Club of Washington.

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