Powell: Strong economy has not reached all Americans

Bloomberg

Federal Reserve Chairman Jerome Powell said that while the central bank has made progresstowards a “strong economy” with rising wages, many lower-income workers have been left behind.
“The Federal Reserve’s mission is to promote a strong economy and sound financial system,” Powell said in remarks prepared for delivery in Washington. “I am glad to say we have made a great deal of progress towards those goals.”
His comments, at the inaugural Janet L. Yellen Award for Excellence in Community Development, were released by the Fed and had not previously been listed on its schedule of public events.
Powell, reiterating his view of recent US economic strength, said a decline in the US unemployment rate to the lowest level since 1969, wage gains, increased household wealth and higher consumer confidence have supported robust consumer spending. Still, the US economy faces longer-term challenges, including slow growth in wages for low-income workers in recent decades, productivity growth which has picked up only recently, and an aging population, he said.
“The benefits of this strong economy and sound financial system have not reached all Americans,” Powell said. “The aggregate statistics tend to mask important disparities by income, race, and geography.”
Powell’s comments didn’t directly address his economic outlook or policy. Last week, the chairman said that the Fed’s interest rates were nearing the range of estimates that Federal Open Market Committee participants view as neutral which neither spur nor slow the economy.
Powell praised his predecessor Yellen and promised to continue her “message” of bringing about a more inclusive economy that benefits more Americans.
In a similar vein, Fed Governor Lael Brainard, in separate remarks at the event, praised Yellen, noting that she was attentive to lower-income communities that would be hurt the worst in a recession. “Chair Yellen brought the subject of economic disparities to the forefront of our conversations, consistently emphasising the importance of an economy that works for everyone,” she said.

TOO-LOW INFLATION
The Federal Reserve’s No. 2 official made clear in a discussion about inflation that he remains more concerned about falling short of the central bank’s 2 percent objective than running above it.
“In recent decades, the asymmetry has been towards disinflation forces,” Vice Chairman Richard Clarida said in an interview with Bloomberg Television. Asked about the price impacts of globalisation, he said that “we are in a world where central banks, including the Fed, are focussed on keeping inflation away from disinflation.”
Clarida’s comments came just after he expressed little concern about price pressures exceeding the Fed’s target.“We have a symmetric objective around 2 percent,” he said. “Two percent is not meant to be a ceiling. We’ve operated below 2 percent, we could operate somewhat above 2 percent, depending on the shocks.”
Clarida’s comments come after he indicated that inflation expectations are coming in on the lower end of the range consistent with price stability.

NOT CONVINCED
The vice chairman’s latest remarks may strengthen the impression that Fed policy makers are not yet convinced they have returned inflation, on a sustained basis, to their long-run objective. The remarks could further reduce expectations the Fed will long continue on its current pace of raising interest rates once a quarter.
Those expectations dropped when Fed Chairman Jerome Powell hinted on November 28 that policy makers may be less aggressive about raising rates in 2019 than they were this year. Powell’s remarks reportedly pleased President Donald Trump, who had been critical of Fed rate hikes.
While investors still anticipate an interest-rate rise when the Federal Open Market Committee meets in Washington December 18-19, they now expect just one hike next year, compared to the three projected by Fed officials in September.