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Bold Tracking World Growth Worries, says President Powell




DALLAS Federal Reserve Rapporteur Jerome Powell said that the central bank was closely monitoring a modest weakening in global growth, whose strength last year had given an important backdrop for the US economy.

"This year has seen a gradual chipping away on that picture. You've seen a slight decline – not a terrible delay," says Mr. Powell on Wednesday night. "You're still seeing solid growth, but you're seeing growing signs of a little of a slowdown. And it's about. "

The global growth outlook was one of a number of challenges Mr. Powell flag. While he did not say that any of them were strong or surprising right now to change the current political path of Fed for gradual raising rates, the weight was remarkable because Such risks have not been so prominent in Mr. Powell's other public comments since he became Chairman of the Board in February.

There is a risk that US economic growth may slow in the coming years, as recent fiscal stimulus from tax evasion and expenses increases "Mr. Powell said in a moderate discussion in Dallas." The capital of the Reserve Bank, Robert Kaplan. "

One challenge is that US growth continues to exceed the rest of the world and puts strains on some emerging economies facing headwinds from a stronger dollar.

"The US economy is only very strong and it is stronger than many other major economies akku rat now, "he said.

While Mr. Powell recognized the recent stock market, selloff could affect economic conditions that slow down growth, he did not suggest it would have been enough for Fed to change his political plans.

Market conditions are "one of many factors" The Fed considers when deciding how to fix the interest rate, he said.

Officials voted unanimously in September to raise the reference price to an area of ​​between 2% and 2.25%, and they kept interest rates stable at their meeting last week. After the meeting, officials offered a most optimistic assessment of the US economy, suggesting that another increase in interest rates is likely at its meeting next month.

In September, Fed officials were penciled in plans to increase their reference card rate once a year. Officials were divided to increase it two, three or four times next year. This would push the price closer to 3%, that is, most officials expect it to be solved in the long run ̵[ads1]1; a so-called neutral interest rate that does not track or slow down growth.

Herr. Powell said Wednesday's biggest challenge to Fed now is to consider how much longer and at what rate to raise prices. He said that the central bank would evaluate "very carefully … how the markets and the economy and business relations react to our policy."

Investors saw Powell's comments carefully Wednesday after comments he made at his latest public appearance 3. October led some investors to believe that the Fed could raise prices longer than they had expected. This led to concerns, in turn, that the Fed could increase prices too much, which led to a recession.

Last month, Mr. Powell played the debate about Fed would increase the rates over neutral, saying that the concern was too early. Prices are "far from neutral at this point, probably," he said during a moderate discussion in Washington. "We need the interest rate to be gradual, very gradually, move back towards normal."

These comments came in the middle of a number of strong US economic data. Together, they raised investors' expectations that the Fed favored more interest rates will increase next year. Return on the benchmark 10-year government bond affected a seven-year high in early October. Bond yields rise as prices drop.

Although the topic of Mr. Powell's October commentary largely reflected many budgets from the Fed officials, some commentators said that their tone reflected greater conviction of raising prices, which contributes to the bond market. Rising bond yields left the stock market on a game trip last month.

At the same time, unemployment fell 3.7% in October, almost a half low and average hourly wages increased 3.1% from one year earlier, the biggest annual increase since 2009.

Most Fed officials subscribe to a version of a framework that sets wages and prices to increase as unemployment falls below a so-called natural level that is consistent with stable inflation. Officials, including Mr. Powell, have been careful noting that this relationship is weaker than it used to be, and that their estimates of natural unemployment could be wrong.

Inflation will be central to determining how the Fed policy path evolves. Inflation has kept close to Fed's 2% target for most of this year after having suffered it for many years. Fed sees inflation around 2% as a sign of balanced supply and demand.

Mr. Powell said Wednesday that he was optimistic, the US economy could sustain higher growth, which could potentially give faster growth without a big increase in inflation. "You will always be on the optimistic side of this economy," he said.

When asked about President Trump's latest criticism of Fed rate hikes, Mr. Powell avoided any escalation. In an interview with The Wall Street Journal last month, Mr. Trump Fed quoted as the biggest risk to the economy. He described the former Fed so mad and uncontrolled because of his plans to gradually raise prices despite the few obvious signs of inflation.

"We have protection against political commitment," said Mr. Powell, quoting legal warranties that prevented the Fed's decisions to be reversed by the executive branch. Mr. Powell did not mention Mr. Trump by name.

Mr. Powell also defended the principle of monetary policy independence for central banks, and cited the importance of credible guard against inflation by remaining free of politics.

"It enables us to better serve the public," he said. "Central Banks, when they get too close to the government, change incentives."

Write to Nick Timiraos at nick.timiraos@wsj.com



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