Fed's Powell again stresses patience as United States economy's 'narrative' unfolds

Powell on Watch

Powell on Watch

On Thursday, Powell said he hasn't seen anything to indicate that the risk of a recession is elevated.

"Growth prospects in other economies around the world have moderated somewhat in recent months, and overall financial conditions have tightened materially, " he said in the text of a speech late Thursday in NY. It would not want to wait too long to see overseas weakness affect the USA economy, he added.

Why? Powell said recent recessions have been caused by the Fed having to "hit the brakes" to combat high inflation or "asset bubbles". There is good momentum going into this year.

The central bank's vice chairman, Richard Clarida, said later on Thursday that if the global slowdown and tightening of financial markets persists, the Fed would take policy steps to offset that.

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.

Stocks turned negative after the comments, with the Dow recently down about 35 points.

"I would expect them to repeat that the economy is strong", Scotiabank economist Derek Holt said.

Donald Trump threatens emergency powers to pay for wall
The standoff has left a quarter of the federal government closed down and hundreds of thousands of federal employees without pay. Trump told reporters , adding later, "If we don't make a deal, I would say 100 percent but I don't want to say 100 percent".

But he noted that the economic data would also be muddied because the shutdown is impacting the Commerce Department, which operates the Bureau of Economic Analysis and the Census Bureau. And the Australian Bureau of statistics will released retail sales figures for November.

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

While he has near weekly meetings with Treasury Secretary Steven Mnuchin, Powell said he has not met with Trump since taking over as Fed chairman, nor does he have any meetings with the president scheduled.

Powell also said he didn't see signs of a recession in the near term, but noted that his "principal worry" was a slowdown in global growth and that while the U.S. economy appears "solid", a slowdown in China "is a concern".

Asked if the Fed still plans two rate hikes, Powell emphasized there is not on a set course.

"There are some who seem determined to talk us into a downturn", Thomas J. Donohue, president of the US Chamber, said in a speech Thursday. "We're waiting and watching".

Moving ahead, today's United States economic docket, highlighting the release of the latest USA consumer inflation figures, will influence the Dollars price dynamics and produce some meaningful trading opportunities later during the early North-American session. The Fed chief will be in focus again this afternoon as he fields questions at the Economic Club of Washington.

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