MNI TRANSCRIPT: Powell on Fed 'Fire Power' and Policy Tools

     WASHINGTON (MNI) - The following is the portion of a transcript from

Federal Reserve Chairman Jerome Powell's press conference after the FOMC meeting

Wednesday:

     Q: Hi, Chairman Powell, Donna Bourke with CNN. With the rate cut today and

another modest adjustment coming down the road, do you worry about lessening The

Fed's fire power? Should there be a recession? And is there any scenario in

which you envision rates drifting lower into negative territory and are there

any other tools you could use before having to go there?

     A: You know... in terms of fire power, I think the general principle, as I

mentioned earlier, it can be a mistake to try to hold on to your fire power

until a downturn gains momentum and then, so... there's a fair amount of

research that would show that's the case. I think that principle needs to be

applied, carefully, to the situation at hand. What we believe we're facing here

-- what we think we're facing here is a situation which can be addressed and

should be addressed with moderate adjustments to the federal funds rate. As I

mentioned, we are watching carefully to see whether that is the case. If, in

fact, the economy weakens more... then we're prepared to be aggressive and we'll

do so, if it turns out to be appropriate. You mentioned negative interest rates,

so... negative interest rates is something that we looked at during the

financial crisis and chose not to do. We chose, after we got to the effective

lower bound, we chose to do a lot of aggressive forward guidance and... also,

large scale asset purchases and those were the two unconventional monetary

policy tools we used extensively. We feel they worked, fairly well... we did not

use negative rates and I, I think if we were to find ourselves at some future

date, again at the effective lower bound, not something we're expecting, then I

think we would look at using large scale asset purchases and forward guidance. I

don't think we'd be looking at using negative rates. I just don't think those

will be top of our list. By the way, we're in the middle of a monetary policy

review, where we're looking through all of these questions about the longer run

framework, the strategy, tools and communications and... we expect that to be

complete head sometime around the middle of next year.

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

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