Federal Reserve Chairman Jerome Powell said a healthy U.S. economy has faced some “crosscurrents and conflicting signals” that officials in January decided warranted taking a patient approach to future interest-rate changes.
With inflation pressures “muted,” the Federal Open Market Committee in its decision last month to keep interest rates unchanged “determined that the cumulative effects’’ of its actions and global and financial developments, “along with ongoing government policy uncertainty, warranted taking a patient approach with regard to future policy changes,’’ Powell said in prepared testimony.
“Going forward, our policy decisions will continue to be data dependent and will take into account new information as economic conditions and the outlook evolve,’’ he told the Senate Banking Committee.
The Fed chairman’s remarks showed no bias toward further interest-rate increases or cuts. He said the data point to continued spending gains this quarter, and he expected the negative effects of the government shutdown to “unwind over the next several months.’’ Under further questioning by senators, Powell again re-emphasized that he isn’t pre-judging the direction of policy.
“Wages have moved up. We welcome that,” he said. “We don’t find it troubling from an inflation standpoint.” He added that “this is a good time to be patient and watch and wait and see how the situation evolves.”
The FOMC in January expected the economy to expand “at a solid pace,’’ though somewhat slower than 2018, he said in prepared remarks. The committee also expects the job market to remain “strong.’’
Most U.S. stocks edged higher as Powell forecast solid but slower growth. After opening lower, the S&P 500 recovered, led by gains among consumer stables, information technology and energy stocks.
But Powell cited a number of near-term and long-term risks to the outlook.
“Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year,’’ the Fed chairman said. “Growth has slowed in some major foreign economies, particularly China and Europe.’’
He added that “uncertainty is elevated around several unresolved government policy issues, including Brexit and ongoing trade negotiations.’’