PALO ALTO (Reuters) – The Federal Reserve does not see problems in the US economy that guarantee an immediate change in its policies, and it will be cautious not to shock financial markets as it stabilizes the bond portfolio, Fed Chair Jerome Powell said Friday.
FILE PHOTO: Federal Reserve Mayor Jerome Powell is holding a press conference after a political meeting in Washington, USA, January 30, 2019, in Washington, USA. REUTERS / Leah Millis / File Photo
The US Federal Reserve is approaching a major milestone in its efforts to relax financial measures to combat the 2007-09 recession.
In an extensive speech at Stanford University, Powell said the Fed was "good together" in discussions about a plan to end the liquidation, such as the balloon during and after the recession.
While there were "cross-currents" pointing to economic risks, no flashing warning signals were serious enough for the Fed to change the interest rate stance, he said.
"With nothing in the prospect of requiring an immediate policy response and in particular given lower inflationary pressures, the committee has adopted a patient, wait and see approach," Powell said in prepared remarks, referring to the Fed's Federal Open Market Committee policy setting.
He said the Fed would soon communicate details of its plan to stop shrinking its $ 4 trillion balance later this year. His remarks appeared aimed at reassuring financial investors that the Fed would hurt not to shock investors.
"When we feel cautious about this goal, we will move transparently and predictably to minimize unwanted market disruption and risk to our two-mandate goals," he said. The Fed is a dual mandate for maximum employment and stable price maintenance.
Powell's comments were the latest from some Fed makers until the end of Fed's next policy-setting meeting, to be held March 19-20.
His remarks came after the Ministry of Labor announced on Friday that US employment growth occurred almost in February, a sign of a sharp decline in economic activity in the first quarter.
The Fed had released a statement in January which suggested that it would no longer be certain whether it would continue to raise interest rates after hiking four times in 2018. The market can look to Fed's quarterly rate hike, released after Fed's forthcoming March meeting, for clues on when it can continue with interest rate increases.
On Friday, Powell warned against reading too much in these forecasts, noting that in recent markets it had mistakenly blamed them as political promises. He said he asked a small panel of fellow Fed-makers to find a better way to communicate their role.
In December, the proposed policy developers expected the two interest rates to rise this year. Markets now expect no one.
Powell also encouraged the need for the Fed and other central banks to find better ways to deal with transparent low inflation, saying that as the Fed considers options this year, there should be serious attention to strategies that would drive inflation higher to offset earlier. outbreaks of weak inflation.
But Powell said he sees a "high bar" for some fundamental changes in the Fed's current approach because of the potential to unintentionally undermine public confidence in the US central bank's efforts to combat inflation.
Additional reporting by Ann Saphir and Jason Lange; Editing by Leslie Adler