MNI POLICY: Fed Mon Pol Report: US Econ Solid, Fed 'Patient'>

--Report Provides No Further Balance Sheet Runoff Details 

--Chair Powell To Testify Before Senate Committee Tuesday

By Kevin Kastner, Harrison Clarke, and Shikha Dave

     WASHINGTON (MNI) - The Federal Reserve's semi-annual policy report 

to Congress released Friday charted little new ground, repeating much of 

the January FOMC statement and minutes released on Wednesday.

     Fed Chair Jay Powell will deliver testimony based on this report on 

Tuesday, and will answer questions from senators. He repeats his 

testimony on the House side on Wednesday. 

Here are the key takeaways from the report: 

     - The report provided no new information on a slowdown in balance 

sheet tapering, only repeating that the ultimate size of the balance 

sheet and the size of reserves themselves will be much larger than 

before the crisis. The report noted that the "size of the balance 

sheet will be importantly determined by the various factors affecting 

demand for Federal Reserve liabilities." 

     - The report, repeated that the US economy has increased "at a 

solid pace" through the end of 2018, even as consumer spending and 

housing activity slowed toward the end of the year. However, it noted 

that economic growth in foreign economies, particularly advanced 

economies, slowed dramatically over the last year. As they said in their 

January statement, the FOMC will monitor these developments. 

     - The report repeated that inflation pressures are "muted," a key 

reason along with the deterioration in foreign economies for the FOMC to 

remain "patient" when deciding the future path of rates. 

     - The report repeated their reluctance to adopt a single monetary 

policy rule, something some in Congress has pushed for, noting that 

their "approach for conducting systematic monetary policy provides 

sufficient flexibility to address the intrinsic complexities and 

uncertainties in the economy while keeping monetary policy predictable 

and transparent." 

     ** MNI Washington Bureau: 202-371-2121 ** 

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