US Federal Reserve chief sees slower growth for US in 2019

Associated Press
US Federal Reserve chief sees slower growth for US in 2019

WASHINGTON — Federal Reserve chairman Jerome Powell told Congress on Tuesday the US economy should keep expanding at a solid, though somewhat slower pace this year. But he warned of growing risks, including a global slowdown, volatile financial markets and uncertainty about US trade policy.

In delivering the Fed’s semiannual monetary report to Congress, Powell said the Fed will be “patient” in determining when to boost its benchmark policy rate in light of the various “crosscurrents and conflicting signals.”

“When I say that we are going to be patient, what that really means is that we are in no rush to make a judgment about changes in policy,” Powell said in response to questions from lawmakers on the Senate Banking Committee. “We are going to be patient. We are going to allow the situation to evolve ... and allow the data to come in. And I think we are in a good place to do that.”

The Fed in December indicated it could hike rates two times this year. But many private economists believe the Fed will keep rates unchanged until late this year and may not hike at all.

Andrew Hunter, senior US economist at Capital Economics, said he believes a slowing economy will prompt the Fed to leave rates unchanged this year and to start cutting them next year.

“We think the Fed is already done hiking rates,” he said. “We expect a further slowdown over the course of this year to convince the Fed to begin cutting rates by early 2020.”

In his report to Congress, Powell repeated assurances the Fed has been making since January that it plans to be patient in deciding the next moves on interest rates. Financial markets had little reaction to Powell’s congressional testimony. The Dow Jones Industrial Average ended the day down 33 points.

In his testimony, Powell said that the economy grew at a strong pace last year, with employment and inflation remaining close to the Fed’s goals. He said it appeared that overall growth was slightly below three percent in 2018. The Fed expects 2019 growth to slow somewhat.

He said that while the 35-day partial government shutdown “created significant hardship for government workers and many others, the negative effects on the economy are expected to be fairly modest and to largely unwind over the next several months.”

Powell cited a number of factors that could slow growth have emerged in recent months.

“Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year,” Powell said.

He noted that growth has slowed in major foreign economies, including China and Europe, and “uncertainty is elevated” around major policy issues such as Brexit, Britain’s proposed exit from the European Union, and ongoing US trade negotiations with various countries.

Amid the risks, Powell said that the solid increase in the past year in the proportion of Americans working or looking for work was very encouraging. Despite the progress, the labor force participation rate remains lower in the US than most other wealthy nations, he said.

Powell blamed a lack of job skills and education for the discrepancy in the US participation rates compared to other countries. But Massachusetts Sen. Elizabeth Warren, who is running for the Democratic presidential nomination, called out “child care,” a reference to economic research that suggests many women have dropped out of the workforce because of the high cost of child care.




  • Latest
  • Trending
Are you sure you want to log out?

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

or sign in with