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US economy 'strong' but benefits uneven: Powell
Itta Bena, Mississippi
US Federal Reserve chairman Jerome Powell said the US economy is "strong" though its benefits haven't been felt evenly across the country.
"Today, data at the national level show a strong economy," Mr Powell told students on Tuesday at Mississippi Valley State University. "Unemployment is near a half-century low, and economic output is growing at a solid pace."
Speaking in Itta Bena, Mississippi, located in Leflore County where unemployment at 7.3 per cent in December was almost double the national average, Mr Powell said: "We know that prosperity has not been felt as much in some areas, including many rural places." The central bank can help by delivering on its goals for price stability and full employment, he noted.
It was the first visit by a Fed chairman to the nation's second-poorest state in at least 20 years, and the man introducing Mr Powell said he was the most important visitor to the Mississippi Delta region since Bobby Kennedy in the 1960s.
The Fed signalled last month that it's done raising interest rates for at least a while and will be flexible in reducing its bond holdings. The sweeping pivot by the Federal Open Market Committee from a bias toward tighter monetary policy at the end of last year helped spark a broad-based upswing in financial markets.
In remarks earlier to students, Mr Powell said that officials "don't feel the probability of recession is at all elevated". US growth was strong in 2018 but is expected to slow somewhat this year as the global economy cools and as the stimulus from US tax cuts and government spending increases fade. Still, the labour market remains robust with unemployment of 4 per cent near the lowest levels since the 1960s.
The central bank raised borrowing costs four times last year and the target range for its benchmark policy rate of 2.25 per cent to 2.5 per cent has now reached the range that policy makers estimate to be neutral that neither spurs nor slows growth.
Investors are leaning towards the Fed's next move being a cut, according to pricing in interest-rate futures contracts.
Decades of bank industry consolidation have weighed on the economies of rural areas as branches and local community banks disappeared and access to financial services declined, Mr Powell said, citing meetings of Fed staff held last year in communities where banks had closed.
The trend is likely stunting business and consumer lending, particularly for already poor and isolated communities, Mr Powell said at a conference to address ways to improve financial services and reduce poverty levels in rural areas.
"The loss of the branch often meant more than the loss of access to financial services; it also meant the loss of financial advice, local civic leadership, and an institution that brought needed customers to nearby businesses," Mr Powell pointed out.
The largest impacts, he said, are on "small businesses, older people, and people with limited access to transportation". That comes at a time, he added, when the economy as a whole is doing well, but the benefits are not well-spread.
"Data at the national level show a strong economy. Unemployment is near a half-century low, and economic output is growing at a solid pace," Mr Powell said. "But we know that prosperity has not been felt as much in some areas, including many rural places," like the counties of the Mississippi Delta.
Mr Powell spoke at a conference where such issues are at centre stage, with members of local community development groups focusing, for example, on how "financial deserts", particularly in rural places, have driven families to rely on high-interest payday loans and other more expensive forms of borrowing.
Mr Powell said the Fed had some tools to try to address the problem, but that they are limited - enforcing, for example, the provisions of the Community Reinvestment Act (CRA) that assess commercial banks' loans to small businesses and minority applicants.
Non-bank lending, of the sort that conference attendees flagged as a persistent problem, is not under the Fed's oversight.
Mr Powell said he hoped a debate over change to the CRA would lead to a law that would "more effectively encourage banks to seek opportunities in underserved areas". He said he felt the Fed's move to lighten regulations on community banks could help by keeping more of them in business.
Mr Powell's prepared remarks did not delve into monetary policy.
In an earlier question and answer session with students he said he does not think there is a large risk of recession right now. "We don't feel that the probability of recession is at all elevated," the Fed chairman said. BLOOMBERG, REUTERS
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