Powell Testifies Before House Budget Committee on Economic Outlook -- 2nd Update
14 November 2019 - 3:50PM
Dow Jones News
By Nick Timiraos
Federal Reserve Chairman Jerome Powell returned to Capitol Hill
on Thursday for a second day of testimony about the U.S. economy,
interest-rate policy and financial regulation.
Mr. Powell said Wednesday during 90 minutes of testimony that
officials believe their current policy stance is "likely to remain
appropriate" as long as the economy grows moderately and the labor
market remains strong.
Asked if that meant the Fed planned to maintain its current
benchmark rate through the next year, Mr. Powell said, "I wouldn't
say that at all." If new data prompted a material reassessment of
the outlook, the Fed would "act appropriately," he said.
Mr. Powell appeared before the Joint Economic Committee, a
bicameral panel, on Wednesday. He will testify Thursday morning at
the House Budget Committee, which is headed by Rep. John Yarmuth
(D., Ky.).
Fed officials have cut their short-term rate three times since
July, most recently in October to its current range between 1.5%
and 1.75%. Officials cut rates to cushion against the risks that
the U.S. economy slows sharply from a slide in business investment
and decelerating global growth exacerbated by rising trade tensions
between the U.S. and China.
Businesses have told the Fed that trade uncertainty has been a
"real distraction" that has weighed on sentiment and investment
decisions, Mr. Powell said on Wednesday.
Mr. Powell has faced unusual public criticism from President
Trump this year for not moving more aggressively to lower interest
rates.
Mr. Trump said in a tweet on Thursday that Walmart Inc.'s
quarterly earnings numbers, which showed annual sales had increased
but income had fallen, showed that his tariffs hadn't hurt growth.
"No impact from tariffs.... Inflation low (do you hear that
Powell?)!" Mr. Trump said.
Mr. Trump's attacks on the Fed ended a bipartisan precedent
extending to the Clinton administration in which presidents didn't
publicly direct the central bank on how to set policy. In the 1960s
and 1970s, inflation accelerated after presidents pressured the
central bank to stimulate growth.
Mr. Yarmuth said Thursday he supported the principle that the
Fed should have greater independence in setting policy, and he
called Mr. Trump's repeated attacks of the Fed "unacceptable and
dangerous."
Separately Wednesday, Mr. Powell repeatedly highlighted the risk
that monetary policy will have less ability to counteract a future
recession because short-term rates and long-term bond yields are
lower than they have been in past periods of steady growth and
rising employment.
In recent downturns, the Fed has cut its short-term rate by
around 5 percentage points. "We're too close, closer than we would
like, to zero, when we kind of run out of options," said Mr.
Powell.
Write to Nick Timiraos at nick.timiraos@wsj.com
(END) Dow Jones Newswires
November 14, 2019 10:35 ET (15:35 GMT)
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