Powell: Fed is in no rush to make policy change decision

Bloomberg

Federal Reserve Chairman Jerome Powell said a healthy US economy has faced some “crosscurrents and conflicting signals” that officials in January decided warranted taking a patient approach to future interest-rate changes.
With inflation pressures “muted,” the Federal Open Market Committee in its decision last month to keep interest rates unchanged “determined that the cumulative effects’’ of its actions and global and financial developments, “along with ongoing government policy uncertainty, warranted taking a patient approach with regard to future policy changes,’’ Powell said in prepared testimony.
“Going forward, our policy decisions will continue to be data dependent and will take into account new information as economic conditions and the outlook evolve,’’ he told the Senate Banking Committee. “We’re in no rush to make a judgment about changes in policy.”
Investors took Powell’s remarks in their stride, with the S&P 500 Index little changed. Treasuries remained slightly higher on the day as Powell spoke, while the dollar was marginally lower after swinging between small gains and losses.
The Fed chairman’s remarks showed no bias towards further interest-rate increases or cuts. He said the data point to continued spending gains this quarter, and he expected the negative effects of the government shutdown to “unwind over the next several months.’’ Under further questioning by senators, Powell again re-emphasized that he isn’t pre-judging the direction of policy.
“Wages have moved up. We welcome that,” he said. “We don’t find it troubling from an inflation standpoint.” He added that “this is a good time to be patient and watch and wait and see how the situation evolves.”
The FOMC in January expected the economy to expand “at a solid pace,’’ though somewhat slower than 2018, he said in prepared remarks. The committee also expects the job market to remain “strong.’’ But Powell cited a number of near-term and long-term risks to the outlook.

‘MORE VOLATILE’
“Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year,’’ the Fed chairman said. “Growth has slowed in some major foreign economies, particularly China and Europe.’’
He added that “uncertainty is elevated around several unresolved government policy issues, including Brexit and ongoing trade negotiations.’’
Powell said the US also faces longer-run challenges, including productivity that is too low, “relatively stagnant incomes” for many families, a lack of upward economic mobility for lower-income workers, and government debt that’s on an “unsustainable path.”
Powell also highlighted the progress the Fed has made in trimming its balance sheet to about $4 trillion, down by some $500 billion from its 2014 peak.