Fed Chair Jerome Powell reiterated his recent messages in a speech in New York today. He noted that “nearly all job market indicators are better than a few years ago, and many are at their most favorable levels in decades.” Business-sector productivity growth also “moved up in the first three quarters of 2018.” Price stability side of Fed’s mandate is “in a good place” as “inflation by our preferred measure averaged roughly 2 percent last year” but “signs of upward pressure on inflation appear muted despite the strong labor market”.

Powell also noted again that “over the past few months we have seen some crosscurrents and conflicting signals about the near-term outlook.” Those include slowdown in major economies, particularly China and Europe. There is elevated uncertainty around unresolved government policy issues including Brexit and trade negotiations. Financial markets conditions have tightened since last fall. Also, “some surveys of business and consumer sentiment have moved lower. Unexpectedly weak retail sales data for December also give reason for caution.”

All in all, Fed will be “patient as we determine what future adjustments to the target range for the federal funds rate”. He also added that “common-sense risk-management approach has served the Committee well in the past.”

Full speech here.

Dallas Fed President Robert Kaplan said yesterday that it could take a few months to see how much the US economy is slowing. And he added that “I don’t think we should be taking any action on the fed funds rate”. His comments are in line with the expectations that Fed should at least stand pat through the first half of the year.

Meanwhile, Kaplan also echoed other Fed official’s comments that there will be decision regarding the balance sheet runoff in the “not-too-distant future”. Though, he declined to comment whether the decision will be made by March FOMC meeting.

He also indicated that the balance is a “critical tool” that Fed need to have as “one of the several tools in the event of a down turn”. And the balance needs to have the capacity to respond to the next downturn.

Fed Vice Chair Richard Clarida said in a speech that inflation is estimated to have been “a little bit below 2 percent of late”, largely because of “recent decline in energy prices”. But the better indicator of future inflation, core PCE, is estimated to have been “about 2 percent”. AT the same time, market-base measures of inflation compensation have “moved lower, on net”. Some survey-based measures of longer-term inflation expectations are little changed. Taken together, Clarida said “evidence suggests that measures of expected inflation are at the lower end of a range that I consider to be consistent with our price-stability goal of 2 percent PCE inflation.”

But he also noted that “a number of crosscurrents that are buffeting the economy bear careful scrutiny”. He echoed Fed Chair Jerome Powell’s comments and pointed to slowing global growth, “in particular in China an Europe”, global policy uncertainty, volatile financial market conditions. And they are “making efforts to extract signal from noise more challenging.”

Clarida also reiterated Fed’s position that “with employment and inflation now at or close to our dual-mandate objectives, the FOMC in its January statement indicated it can afford to be patient as we assess the need for further adjustments in our policy stance”.

He added that going forward, Fed needs to be “cognizant of the balance we must strike between (1) being forward looking and (2) maximizing the odds of being right given the reality that the models that we consult are not infallible.”

Clarida’s full speech here.