Powell: Fed 'Waiting and Watching' With Patience on Rates

Jan 13, 2019, 02:13
Powell: Fed 'Waiting and Watching' With Patience on Rates

The FTSE 100 is on track for its best week in three months after global stocks were lifted by reassurances from the US Federal Reserve that it could be patient about interest rate rises.

"Particularly with inflation low and under control, we have the ability to be patient and see which of those two narratives is going to be the story of 2019", he said.

"So what we're seeing - you would expect at a time like this revenues rising faster than spending, because the economy is strong, more people working, paying taxes, fewer people collecting unemployment benefits and such, and the deficit would shrink", he continued.

That prospect has cheered markets, which had grown anxious that the Fed was not taking into account a variety of headwinds that could slow USA growth this year.

"If we find that the ongoing programme of balance sheet normalisation or any other aspect of normalisation no longer promotes the achievement of our dual-mandate goals, we will not hesitate to make changes, " Clarida said.

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Earlier: Jerome Powell has been moving markets - up and down - lately.

The Fed chair will be taking questions in what will be his first major comments since the central bank took a decidedly more cautious tone about its future pace of interest rate hikes.

Speaking to an audience in Washington, Powell delivered the same reassuring message of restraint and flexibility that bolstered markets last Friday.

The speech by Fed Vice Chairman Richard Clarida reinforced a message of patience and possible re-calibration given by several of his colleagues in recent days, including Chairman Jerome Powell who earlier in the day said the USA central bank would be watching to see whether such risks become reality.

"Similarly, Trump also softened his stance on China after sharp falls in stock prices". A couple of participants noted that the tightening in financial conditions so far did not appear to be restraining real activity, although a more persistent tightening would undoubtedly weigh on business and household spending.

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Powell also said he didn't think it would be appropriate to reject an invitation to meet with Trump, but he hasn't yet received such an invitation. The partial government shutdown is unlikely to leave a mark on the economy in the short term, though the Fed will have a less clear picture of growth without data from the Commerce Department, which releases figures including retail sales and gross domestic product.

But Rosengren, like Evans, are upbeat about the U.S. economy, while acknowledging the growth will slow this year. The principal worry is global growth, he said in questioning by David Rubenstein, the co-founder of private-equity firm Carlyle Group, where Powell was previously a partner.

The central bank's quarterly forecast in December showed Fed officials still expected two more increases in 2019.

The 10-year U.S. Treasuries yield last stood at 2.737 percent.

"It's a tightly integrated economy and financial markets will see the effects of that", he said.

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