Fed stresses ‘patient’ interest rate strategy

The Federal Reserve’s top officials say the economy is in a good place and suggest further interest rate increases will depend on incoming data easing concerns about risks to their outlook.

Comments in the last 72 hours by Chairman Jerome Powell and No. 2 Richard Clarida lay out clear lines of debate when the Federal Open Market Committee meets later this month.

“Their baseline outlook is solid, but the clear discussion is risks are skewed to the downside,” said Michael Hanson, chief U.S. macro strategist at TD Securities in New York.

Officials will release quarterly forecasts at the March 19-20 FOMC meeting. What’s becoming clear is their outlook for U.S. growth could be downgraded and their December estimates for hiking twice in 2019 could get pared back. Investors currently expect them to keep rates on hold all year.

“Even relative to December, I would probably mark down” my forecast for global growth, Clarida told the National Association for Business Economics Thursday. Among officials’ top concerns are a cooling world expansion, somewhat tighter financial conditions, and policy uncertainty about trade.

The new buzzword on the Fed’s policy committee is “patient,” and it has been further emphasized through speeches and two days of testimony by Powell before Congress this week.

What’s become clear is that Powell and Clarida are willing to let inflation measures tell them whether the Fed’s benchmark policy rate is too low or high, and they don’t have a strong conviction on whether it should still be heading higher.

Powell voluntarily reiterated this at the close of his hearing in the Senate on Tuesday. “We’re going to be patient,” Powell told the Senate Banking Committee Chairman Mike Crapo. “We’re going to allow the situation to evolve.”

SARAH SILBIGER / THE NEW YORK TIMES Chairman Jerome Powell and the Fed appear to be willing to let inflation measures tell them whether the policy rate is too low or high.