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Fed's Powell expects 'sustained expansion' of US economy
[WASHINGTON] The US economy is likely to continue to grow, but faces continued risks from the global slowdown and trade disputes, which have already dampened expansion, Federal Reserve chief Jerome Powell said Wednesday.
In the first of back-to-back days of testimony before Congress, Mr Powell reaffirmed that the central bank is on hold after cutting the benchmark lending rate three times this year.
After providing that stimulus to the economy, Mr Powell said, "my colleagues and I see a sustained expansion of economic activity, a strong labour market, and inflation near our symmetric two percent objective as most likely."
However, "sluggish growth abroad and trade developments have weighed on the economy and pose ongoing risks," he told the Joint Economic Committee.
He also flagged his concerns about an "unsustainable" government budget and "high and rising debt," which could limit policymakers' ability to boost spending as needed in an economic downturn.
US GDP growth slowed to 1.9 per cent in the third quarter from 2.5 per cent in the previous three months and while that was partly due to a 40 day strike at General Motors, trade conflicts also have weakened business investment and "weighed on exports and manufacturing this year," Mr Powell said in his prepared testimony.
President Donald Trump on Tuesday again accused the Fed chief of raising rates too quickly and cutting too slowly, even indicating he would like to see negative interest rates used in Europe and Japan where economic growth has been persistently sluggish.
But Mr Powell repeated the message he delivered after the third rate cut in late September, saying: "We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook."
The Fed raised the key borrowing rate four times in 2018, but reversed course this year as Mr Trump's trade conflicts dragged on and began to impact the real economy.
Mr Powell said the rate cuts were designed to support continued growth "and to provide some insurance against ongoing risks."
And while he consistently declines to respond to Trump's criticisms, in a veiled aside to start his testimony he said the Fed has been granted independence to conduct monetary policy "based on facts and objective analysis."