Monday, 01 June, 2020


Fed Chair Powell: 'No reason' rising wages and job gains can't continue

Federal Reserve Board Chairman Jerome Powell speaks during a press conference Fed Chair Powell: 'No reason' rising wages and job gains can't continue
Conrad Doyle | 13 February, 2020, 16:10

Earlier Thursday, Trump wrote in a Twitter post during Federal Reserve Chair Jerome Powell's congressional testimony that the "Fed Rate is too high" and a strong dollar is "tough on exports" for US companies. Chairman Powell said he expected it to move closer to the target over the next few months.

On Monday, Philadelphia Federal Reserve Bank President Patrick Harker said that if the coronavirus-related economic malaise now hurting China spills over and deals the US economy a material blow, the Fed may be forced to drop interest rates in an effort to contain the fallout.

Shelton is set to appear alongside fellow Fed nominee Christopher Waller, who now serves as the executive vice president and director of research at the Federal Reserve Bank of St. Louis.

Powell told both committees that the USA economy was generally in good shape, as it managed to overcome headwinds previous year due to the trade war between the United States and China and slowing global economic growth. When asked about the illness, Powell explained it's "too early to say" what the impact on the US economy will be, but the question is whether the effects will be persistent, which would require Fed action.

When asked, he said if a downturn were to occur, the Fed would "rely on tools we did use", rather than negative interest rates, although the Fed will monitor the countries that are using sub-zero rates to see how they work. "Low rates are not really a choice anymore, they are a fact of reality". "And we'll be looking at the economic data".

Continued job gains and rising wages should boost consumer spending this year, despite soft business investment. The answer, he said, is still too early to know.

Separately, on Tuesday, Federal Reserve Bank of St. Louis President James Bullard said the Fed has "a reasonable chance" to achieve a soft landing.

"The question we will be asking is will these be persistent effects that could lead to a material reassessment of the outlook", he said.

The tools include "forward guidance, which says that we will keep rates low, and that it is also large-scale asset purchases of longer-term securities to drive longer rates down and support the economy", he explained, adding the central bank will use those tools aggressively to fight the next recession. But that's impossible now as the Fed's benchmark federal funds rate is currently in a range of 1.5-1.75 percent. "And with very limited experience using these tools in this way, we feel uncertain".

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