Fed's Powell Again Stresses Patience as US Economy's ‘Narrative' Unfolds
00:31, Jan 13, 2019
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Federal Reserve Chairman Jerome Powell said the US central bank can be patient before adjusting interest rates again as it waits to see how global risks impact the domestic economy.
"If we have an extended shutdown, I do think that would show up in the data pretty clearly", Powell said.
Thursday's brief drop stood in contrast to the response to Powell's remarks last Friday, when the Dow surged 747 points after Powell said the Fed is willing to be "patient" and "flexible" about future interest rate hikes - sentiments he reiterated Thursday.
At the close, Wall Street finished up for the day but it does not take much for investors to run for the exits, with markets already on edge amid concerns the global economy is slowing just as interest rates are rising and uncertainty about the US-China trade war.
The question of whether President Donald trump have found harsh warnings of a rate increase hearing, is idle.
Powell said last week that he's "listening sensitively to the message that markets are sending" about downside risks.
"Especially with inflation low and under control, we have the ability to be patient and watch patiently and carefully as we. figure out which of these two narratives is going to be the story of 2019", Powell said at the Economic Club of Washington.
The monthly reductions, effectively running on autopilot, have been criticized by some as a steady tightening of financial conditions the Fed should reconsider.
"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 on Thursday in NY. 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.
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. Fed chairs have met with presidents in the past, he added.
He also downplayed December predictions from Fed policymakers showing that, at the median, interest rates would be raised twice this year.
Even so, USA central bankers face a challenging year that's complicating their communication. Those forecasts appear supported by a robust December labor-market report, which showed the economy added 312,000 non-farm jobs, the most in 10 months.
Following a bout of heightened volatility in financial markets in recent weeks, central bankers are now taking pains to assure investors that they aren't in a hurry to lift rates further.
That would force companies to consider unemployed US workers for entry-level jobs instead of bringing in workers from overseas. Trump and Democrats in the US Congress are at an impasse over spending legislation to fund the federal government.
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