Patient policy still warranted despite solid growth: Powell

Washington: Rising risks and recent soft data shouldn’t prevent solid growth for the US economy this year, but the Federal Reserve will remain “patient” in deciding on further interest rate hikes, Fed Chairman Jerome Powell said on Tuesday.

In prepared testimony released in advance of a hearing before the US Senate Banking Committee, Powell reaffirmed the policy shift made by the US central bank in January, citing “crosscurrents and conflicting signals” that weakened the case for further rate increases and made an otherwise positive outlook less certain.

“We view current economic conditions as healthy and the economic outlook as favorable,” Powell said in the prepared statement, projecting that the US economy in 2019 will “expand at a solid pace, albeit somewhat slower than in 2018, and the job market to remain strong.”

The Fed estimates that gross domestic product will have grown by slightly less than 3 per cent in 2018. The US government is scheduled on Thursday to release its fourth quarter GDP report, which was delayed by the recent partial US government shutdown.

“Some data have softened but still point to spending gains this quarter,” Powell said, highlighting the sometimes contradictory set of information the Fed grappled with at year’s end.

That included a global market sell-off, fears of a widening US-China trade war, slow growth among major US trading partners, and worries that the Fed itself would raise rates more aggressively than conditions warranted.

Recent retail sales data were disappointing and some Fed officials have worried that inflation could slip, though Powell said the central bank still feels the pace of price increases will remain close to its 2 per cent target after accounting for the temporary influence of lower oil prices.

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The recent 35-day government shutdown added to those US growth concerns, though Powell said it is expected to have had a “fairly modest” impact on the overall economy that will “largely unwind” in the coming weeks as workers, for example, receive back pay for missed time.

Powell will also appear before the House Financial Services Committee on Wednesday. The two hearings are part of the semi-annual rounds of testimony the Fed chief delivers to Congress each year.

It will be Powell’s first since Democrats won control of the House of Representatives in the November elections, and he comes with much to discuss.



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