In his prepared remark for semi-annual testimony to Congress, Fed chair Jerome Powell acknowledged “crosscurrents and conflicting signals” in the past few months. Financial markets became “more volatile” toward year-end. Financial conditions are now “less supportive”. Also, growth slowed in some major foreign economies, “particularly China and Europe”. And there is “elevated” uncertainty in issues including Brexit and trade negotiations.
Domestically, the US is facing “important longer-run challenges”. Productivity “has been too low”. Labor force participation among “prime-age men and women” is now lower in the US than in most other advanced economies. “relatively stagnant incomes”, “lack of upward economic mobility” are also important challenges. Federal government debt is also on an “unsustainable path”.
On monetary policy, Powell reiterated that “the extent and timing of any further rate increases would depend on incoming data and the evolving outlook.” He noted that inflation pressure were “muted” in January. and the cumulative development warranted “taking a patient approach” to future policy changes. Also, Fed will evaluate the appropriate timing and approach for the end of balance sheet runoff. ahead.
