Published: Fri, January 11, 2019
Business | By Eloise Houston

Powell: Fed can be patient as US economy evolves in 2019

Powell: Fed can be patient as US economy evolves in 2019

"We are very focused on our job", Powell said. The principal worry is global growth, he said in questioning by David Rubenstein, the co-founder of private-equity firm Carlyle Group, where Powell was previously a partner.

Earlier: Jerome Powell has been moving markets - up and down - lately.

James Bullard, president of the St Louis Federal Reserve Bank, one of 12 in the Fed system and a voting member of the policy committee this year, called the current interest rate "a good level", in an interview with the Wall Street Journal.

When asked Thursday whether the central bank intends to raise rates at its meeting at the end of January, Powell said, "You should anticipate we're going to be patient and watching", which was widely interpreted as a "no". It would not want to wait too long to see overseas weakness affect the US economy, he added. Stocks, which closed in the green Thursday, briefly dipped into the red after Powell pointed to more monetary tightening ahead, including continuing to shrink the Fed's $4 trillion balance sheet. Big picture: "they don't have that much further to go and they don't have to go there fast", said Robert Tipp, chief investment strategist with PGIM Fixed Income in Newark, New Jersey.

He agreed with the prevailing view of the U.S. economy slowing to around 2.25-2.5 per cent this year, with unemployment holding around the current 3.9 per cent. The latest forecasts issued in December suggested rates could rise by a median of two more times in 2019, but Powell said it was a mistake to construe that as any sort of official forecast or "plan".

"Notwithstanding strong economic growth and a low unemployment rate, inflation has surprised to the downside recently, and it is not yet clear that inflation has moved back to 2 percent on a sustainable basis, " Clarida said.

Since then, stock markets endured a topsy-turvy end to the year as the USA government shut down and global trade tensions ratcheted higher.

Fed officials and many forecasters expect growth to slow in 2019, but to remain strong enough to continue generating jobs and keeping the unemployment rate near its nearly 50-year low.

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.

While most previous shutdowns have been fairly short and have not affected the economy in the aggregate, Mr Powell said, "if we have an extended shutdown, I think that would show up in the data pretty clearly".

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