Fed's Powell said no 'warning signs' in US economy

Trump Slams Fed Says Shunning Negative Rates Hurts

"The baseline outlook remains favourable", and the current level of interest rates "appropriate", Powell said in remarks prepared for delivery to the US Congress Joint Economic Committee, a panel that includes some members from Congress's House of Representatives and Senate.

Powell is an individual of the few foremost common public figures urging Congress to lower the federal authorities's yearly deficit, which is nearing $one trillion. On average, the Fed has cut rates 5 percent in postwar recessions, Powell said.

The Fed cut short-term rates last month for the third time this year, to a range of 1.5% to 1.75%.

Powell said the rate cuts were created to support continued growth "and to provide some insurance against ongoing risks".

Despite those warnings, in the first of back-to-back days of testimony before Congress, Powell said the USA economy is likely to continue to grow though it faces continued risks from the global slowdown and trade disputes.

Negative rates occur "at times when growth is quite low and inflation is quite low, and you really don't see that here", Powell said. "There's no reason to think that I can see that the probability of a downturn is at all elevated". But as President Donald Trump's aggressive trade conflicts hit business investment and slowed manufacturing, the central bank reversed course and cut rates three times this year.

President Donald Trump has repeatedly blamed the Fed's policies for the slowdown in the U.S. economy, although economists say his tumultuous trade war with China and a global manufacturing slowdown is to blame.

The comments came as US president Donald Trump renewed calls for negative interest rates - effectively charging savers to store fiat currency - and criticized the Fed for not introducing them.

"We're going to be watching, very carefully, incoming data", he said.

North American stock markets were flat Thursday on new fears of a global economic slowdown even as the current bull market became the longest and strongest in history.

Federal Reserve Board Chair Jerome Powell testifies on the economic outlook, on Capitol Hill in Washington, Wednesday, Nov. 13, 2019.

Despite Trump's attacks, both Republican and Democratic lawmakers took a largely supportive and respectful approach to Powell.

Under questioning about the budget deficit, Powell acknowledged that the federal government still had some room to boost the economy through tax cuts or more spending, should a downturn arrive. He suggested base interest rates will likely remain unchanged going forward, unless the US faces expected economic shocks. The United States has advantages, he said, such as a productive, growing economy and the fact that the dollar is the world's reserve currency.

"The data are not sending any signal that the labor market is so hot, or that inflation is moving up, or anything like that", Powell said, noting that the strong job market has many beneficial side effects, including lifting wages for lower-paid workers.



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