MNI POLICY: Headwinds, Will Act to Sustain Expansion: Powell

- Top Takeaways from Chair Powell's Speech

By Evan Ryser

     WASHINGTON (MNI) - The global economy has shown further signs of slowing,

new U.S. tariffs have been imposed on China and long-term bond rates have moved

to post-crisis lows since July's FOMC meeting, but the U.S. economy has

continued to perform well overall, Fed Chair Powell said at the Jackson Hole

symposium Friday, saying the Fed "will act as appropriate."

     Following are key points from Powell's speech:

     -- Chair Powell and FOMC members are "carefully watching developments" and

"will act as appropriate to sustain the expansion, with a strong labor market

and inflation near its symmetric 2% objective."

     -- Trade remains an unknown risk with no recent precedents to serve as

rulebook. While "monetary policy is a powerful tool that works to support

consumer spending, business investment, and public confidence, it cannot provide

a settled rulebook for international trade."

     -- Powell questioned the transitory nature of current policy uncertainty

and what might be their longstanding effects. He said that the Fed can "try to

look through what may be passing events, focus on how trade developments are

affecting the outlook, and adjust policy to promote our objectives."

     -- The speech noted that inflation ran close to the symmetric 2% objective

for most of last year but has been running somewhat below 2% this year.

     -- The FOMC will be "asking whether we should expand our toolkit. In

addition, we are looking at how we might improve the communication of our policy

framework."

     -- Powell noted that the Fed "will act as appropriate to sustain the

expansion" and said that the "key question raised by this era, then, is how we

can best support maximum employment and price stability in a world with a low

neutral interest rate."

     -- Powell painted a nuanced picture, noting "the uncertainty about the

effects of recent developments and the uncertainty we face regarding structural

aspects of the economy."

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

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