Fed’s Powell says economy resilient despite virus risks

WASHINGTON – Federal Reserve Chairman Jerome Powell said Tuesday the U.S. economy appears durable with steady growth and unemployment near a half-century low but faces some risk from the viral outbreak that began in China.

Giving the Fed’s semiannual monetary report to Congress, Powell said that the Fed is content with where interest rates are, suggesting that no further rate cuts are being contemplated unless economic conditions change significantly.

President Donald Trump said in a tweet during that appearance Tuesday that he was not happy with Powell’s message on interest rates.

“Fed rate is too high. Dollar tough on exports,” Trump said in a tweet, saying the Dow Jones industrial average had fallen into negative territory on Powell’s comments. The Dow, however, rebounded and was in positive territory at midday.

Asked about the tweet during the hearing, Powell gave his standard answer about presidential pressure. “My colleagues and I are completely focused on using our tools to support ... our goals, and that is all we are focused on,” he said.

Powell said the Fed is monitoring developments with the coronavirus, which he said “could lead to disruptions in China that spill over to the rest of the global economy.”

In response to lawmakers’ questions, Powell said it was too early to assess the threat the virus poses to the U.S. economy, but he noted that the U.S. economy “is in a very good place” with strong job creation and moderate growth.

Powell said there will be effects on China in the first half of this year and likely there will be some impact on the U.S., but it’s too soon to assess the U.S. impact.

“We will be watching that carefully. And the question we will be asking is will these be persistent effects that could lead to a material reassessment of the outlook” in the U.S., Powell told the House committee.

The daily death toll in China topped 100 for the first time, pushing the number of deaths in China from the virus above 1,000.

China remained mostly closed to business Tuesday with around 60 million people under virtual quarantine in the country, raising concerns about what the loss of production in China, the world’s second-largest economy, will do to global supply chains.

China accounts for more than 80% of smartphone and notebook production globally and more than half of global TV and server production, according to recent estimates.

Powell’s comments came in testimony to the House Financial Services Committee before he spoke to the committee later Tuesday. On Wednesday, Powell will testify to the Senate Banking Committee.

Powell, who has made frequent visits with House and Senate lawmakers to understand their concerns, faced sharp questioning from Rep. Katie Porter, DCalif., about a recent photo that showed him attending a party at the Washington home of Jeff Bezos, head of Amazon.

Porter noted that Trump’s daughter Ivanka and son-in-law Jared Kushner, as well as presidential counselor Kellyanne Conway, were at the Bezos party at a time when Trump has pressured the Fed to lower interest rates.

Powell said he did not talk to any of those people and was at the event to escort his son and his son’s new wife to the party, where he introduced them to former Trump Defense Secretary James Mattis.

Since the last quarter-point rate cut in October, which reduced the Fed’s key policy rate to a range of 1.5% to 1.75%, the Fed has kept policy on hold. Powell’s remarks Tuesday indicated there had been no change in that stance.

The Fed, Powell said, “believes that the current stance of monetary policy will support continued economic growth, a strong labor market and inflation returning to the committee’s 2% symmetric objective.”

Powell said that as long as incoming economic data “remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate.”