MNI POLICY: Fed's Powell: Current Policy Remains Appropriate

-- Fed Sees A Sustained Expansion of Economic Activity

By Evan Ryser

     WASHINGTON (MNI) - Federal Reserve Chairman Jerome Powell on Wednesday

emphasized that the Fed will hold its policy rate steady as it continues to

monitor incoming data and sees the U.S. economy continuing its expansion.

     "We see the current stance of monetary policy as likely to remain

appropriate as long as incoming information about the economy remains broadly

consistent with our outlook of moderate economic growth, a strong labor market,

and inflation near our symmetric 2% objective," Powell said in prepared remarks

for testimony before the Joint Economic Committee of Congress.

     Powell said "if developments emerge that cause a material reassessment of

our outlook, we would respond accordingly. Policy is not on a preset course."

     Chair Powell, who is testifying twice this week before Congress, said the

Fed sees "a sustained expansion of economic activity, a strong labor market, and

inflation near our symmetric 2% objective as most likely."

     Referring to the three rate cuts this year, Powell said: "This favorable

baseline partly reflects the policy adjustments that we have made to provide

support for the economy."

     --POLICY LAG

     Powell continued: "The Committee took these actions to help keep the U.S.

economy strong and inflation near our 2% objective and to provide some insurance

against ongoing risks. As monetary policy operates with a lag, the full effects

of these adjustments on economic growth, the job market, and inflation will be

realized over time."

     However, "noteworthy risks to the outlook remain," Powell said, noting

sluggish growth abroad, trade developments, muted inflation pressures, and

longer-term inflation expectations are at the lower end of their historical

ranges.

     Risks to the financial system remain at a "moderate level."

     "The core of the financial sector appears resilient, with leverage low and

funding risk limited relative to the levels of recent decades," Powell said,

noting that the Fed's Financial Stability Report will be released at the end of

this week.

     The "baseline outlook remains favorable" and the "moderate" Q3 GDP reading

was "due to the transitory effect of the United Auto Workers strike at General

Motors," in addition to weakness in business investment due to sluggish growth

abroad and trade uncertainty.

     Powell said household consumption "continues to rise solidly, supported by

a healthy job market, rising incomes, and favorable levels of consumer

confidence."

     The pace of job gains, Powell said, "has eased this year but remains

solid."

     Conclusions of the Fed's review of its policy framework are likely to be

released around the middle of 2020, he said.

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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