‘Patient’ policy still warranted despite ‘solid’ US growth: Fed
washington — Rising risks and recent soft data should not prevent solid growth for the US economy this year, but the Federal Reserve will remain “patient” in deciding on further interest rate hikes, Fed Chairman Jerome Powell said on Tuesday.
In a prepared testimony released in advance of a hearing before the US Senate Banking Committee, Powell reaffirmed the policy shift made by the US central bank in January, citing “crosscurrents and conflicting signals” that weakened the case for further rate increases and made an otherwise positive outlook less certain.
“We view current economic conditions as healthy and the economic outlook as favourable,” Powell said in the statement, projecting that the US economy in 2019 will “expand at a solid pace, albeit somewhat slower than in 2018, and the job market to remain strong.”
US Treasury yields ticked up modestly. The two-year benchmark rose to 2.49 per cent, from 2.48 per cent, after the prepared remarks. The S&P 500 slightly cut its losses.
The Fed now estimates that gross domestic product grew by slightly
less than 3 per cent in 2018. The US government is scheduled on Thursday to release its fourthquarter GDP report, which was delayed by the recent partial US government shutdown.
“Some data have softened but still point to spending gains this quarter,” Powell said, highlighting the sometimes contradictory set of information the Fed grappled with at year’s end. That included a global market sell-off, fears of a widening US-China trade war, slow growth among major US trading partners, and worries that the Fed itself would raise rates more aggressively than conditions warranted.
Recent retail sales data were disappointing and some Fed officials have worried that inflation could slip, though Powell said the central bank still feels the pace of price increases will remain close to its 2 per cent target after accounting for the temporary influence of lower oil prices. —