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The US central bank is ready to step in
to preserve the American economy’s expansion amid mounting risks, Federal
Reserve Chairman Jerome Powell said Friday.
While the Fed is not expecting a recession, trade frictions — as well as
slower global growth and persistently low inflation — are among the
“significant risks” that policymakers are watching, Powell said during a
conversation at the University of Zurich.
The remarks should strengthen widespread expectations that the central
bank will cut interest rates later this month.
As it becomes increasingly apparent that the US economy has slowed in
2019, President Donald Trump has publicly berated Powell and the Fed for
failing to loosen monetary policy fast enough — something Powell said Friday
policymakers tune out.
“We see the most likely case for the US and for the world too as continued
moderate growth,” Powell said. “We’re not forecasting or expecting a
recession.”
He added that the Fed will “continue to act as appropriate to sustain this
expansion,” while “trade policy uncertainty will be weighing on business
investment decisions.”
Powell’s remarks echoed those made earlier this week by New York Fed
President John Williams, the vice chair of the central bank’s monetary policy
committee, who likewise said policymakers should be “vigilant” and “act as
appropriate” to bolster growth.
The economic landscape has shifted this year, as business investment
weakened noticeably, manufacturing has fallen into decline and job creation
has slowed.
Powell noted, however, that unemployment had remained near historic lows
for about 18 months while wages were rising, fueling consumer spending.
“The consumer has been strong. The service sector has been strong,” he
said. “Our labor market is in quite a strong position.”
Trump on Friday renewed his attacks on Powell, whom the president promoted
to Fed chairman last year, denouncing both 2018’s interest rate increases and
the pace of cutting so far this year.
“Where did I find this guy Jerome?” Trump asked on Twitter.
But in Zurich Powell reiterated that he and his Fed colleagues ignore such
comments when they set monetary policy.
Congress created the Fed to operate as an independent body.
Powell also rejected the suggestion that the Fed could seek to oppose
Trump’s reelection by temporarily undermining the economy.
William Dudley, a top former Fed official, caused a considerable stir last
month by publicly suggesting the Fed should do just that.
“Absolutely not,” Powell said. “Political factors play absolutely no role
in our discussions.”
He also reiterated the Fed’s cautious position on Facebook’s proposal to
introduce a new digital currency, saying the approval process would not be a
“sprint.”
Given Facebook’s global penetration, “it could be systematically important
right away,” he said.
“And because of that it would have to be held to the highest regulatory
expectations.”
(BSS)
