Fri, Nov 15, 2019 page10

• Fed’s Powell sees steady US growth

  PAUSE IN CUTS: Fed policymakers are unlikely to cut rates unless the economy slows enough to cause them to make a material reassessment of their outlook

  • AP, WASHINGTON
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  US Federal Reserve Chairman Jerome Powell on Wednesday said that the Fed is likely to keep its benchmark short-term interest rate unchanged in the coming months, unless the economy shows signs of worsening.

  For now, in testimony before a congressional panel, Powell expressed optimism about the US economy, saying that he expects it to grow at a solid pace, although it still faces risks from slower growth overseas and trade tensions.

  “Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market and inflation near our symmetric 2 percent objective as most likely,” Powell said before the US Congress’ Joint Economic Committee.

  

  US Federal Reserve Chairman Jerome Powell testifies before the US Congress’ Joint Economic Committee on Capitol Hill in Washington on Wednesday.

  Photo: AP

  Fed policymakers are unlikely to cut rates unless the economy slows enough to cause them to make a “material reassessment” of their outlook, Powell said.

  Last month, the Fed cut short-term rates for the third time this year, to a range of 1.5 to 1.75 percent.

  Asked if he expects rates to remain unchanged over the next year, Powell said: “I wouldn’t say that at all.”

  Powell’s testimony came a day after US President Donald Trump took credit for an “economic boom” and attacked the Fed for not cutting interest rates further.

  However, Powell and other Fed officials have said that their rate cuts, by lowering borrowing costs on mortgages and other loans, have spurred home sales and boosted the economy.

  Asked about negative interest rates — which Trump on Tuesday also called for — Powell said that they “would certainly not be appropriate in the current environment.”

  Negative rates occur “at times when growth is quite low and inflation is quite low, and you really don’t see that here,” Powell said.

  Other Fed officials have questioned whether cutting rates below zero has boosted growth in places such as Europe and Japan, where the central banks have pushed rates into negative territory.

  Data suggest that the US’ growth remains solid if not spectacular.

  The US economy expanded 1.9 percent annually in the July-to-September quarter, down from 3.1 percent in the first three months of the year. The unemployment rate is near a 50-year low of 3.6 percent and hiring is strong enough to potentially push the rate even lower.

  Inflation, according to the Fed’s preferred gauge, is just 1.3 percent, although it has been held down over the past few months by lower energy costs and most Fed officials expect it to move higher in the coming months.

  However, Powell reiterated that higher tariffs from the Trump administration’s trade dispute with China and uncertainty over potential future duties have caused many businesses to delay or cut back on their spending on large equipment and buildings.

  This conservative outlook has slowed economic growth.

  Powell urged the US Congress to lower the federal budget deficit so that lawmakers would have more flexibility to cut taxes or boost spending to counter a recession.

  Powell said that the Fed believes the unemployment rate could fall further without necessarily pushing inflation higher — a view suggesting that the central bank is a long way off from hiking rates.
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