Powell hears bipartisan Senate support for Fed independence

Andrew Cummings
February 13, 2020

Markets will be most interested in hearing about potential changes to the United States central bank's inflation targeting regime. "You have a squeeze going on, to do with difficulty in getting lots".

Powell was answering questions from senators on the second day of semi-annual congressional testimony, which also saw him quizzed on the coronavirus and housing, among other topics.

"So he wants to put as much pressure on the Fed as he can", Tchir said.

Powell's remarks suggest the Fed is inclined to keep things where they are, barring any major disruptions.

But the Fed doesn't see any need to ease monetary policy for now.

"So it's a bit of a surprise" that wages have not risen more, he said.

Trump has repeatedly criticized the Fed chair since announcing that he had nominated Powell in 2017, a break with tradition in recent history. "If it really was large enough to hit the USA economy, one could imagine monetary policy responding, not to the virus itself but to just to try to help the US economy manage its way through until the public health officials can get their arms around it".

The US has seen steady job gains that have beat expectations and lasted longer than expected, but Federal Reserve Chairman Jerome Powell acknowledged Wednesday that all is not well. -China trade war and slower overseas growth.

On Monday, Federal Reserve Bank of Philadelphia President Patrick Harker also said the USA economy is in "good shape", and espoused a view that rates should stay where they are.

On the coronavirus, Powell said: Whatever impact it has on the USA economy will show up in the economic data soon, but it's too uncertain to say whether it will lead to a "material" change in the US outlook.

The federal budget's biggest problem, Powell said, is healthcare spending, which accounts for about 17 percent of GDP, more than the norm of about 11 percent in most advanced economies. Though the just-released presidential budget projects a reduction over the next 10 years, it assumes 3 percent economic growth for years to come.

On Monday, Philadelphia Federal Reserve Bank President Patrick Harker said that if the coronavirus-related economic malaise now hurting China spills over and deals the US economy a material blow, the Fed may be forced to drop interest rates in an effort to contain the fallout.

Powel said the Fed's current policy stance will likely remain appropriate, as long as the U.S. economy stays "broadly consistent" with the Fed's outlook.

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