Last Tuesday, Jerome Powell, the Fed Chairman, told the lawmakers of the United States of America, that the Federal Reserve of the United States of America is in “no rush to make a judgment” regarding the further changes to interest rates. His remarks come as he spelled out the approach of the central bank to an economy that is likely slowing.
In two hours of his testimony to the Senate Banking Committee, he elaborated on the “conflicting signals” the Fed has attempted to decipher in the past weeks, including disappointing data on retail sales and other aspects of the economy that is in contrast with wage growth, steady hiring, and the ongoing low unemployment rate.
Powell stated: “The baseline outlook is a good one,” however, he said that slower growth overseas is a drag on the economy of the United States. He said that “we may feel more of” in the coming months.
He added: “We have the makings of a good outlook and our (rate-setting) committee is really monitoring the crosscurrents, the risks, and for now we are going to be patient with our policy and allow things to take time to clarify.”
If anything, the comments of Powell solidified a Fed policy change last month in which it indicated it would delay a three-year cycle of rate hikes, which had been projected to run well into 2020 next year until the inflation or growth dynamics change.
Powell said that the flow of new workers into the labor force, for example, has shocked the central bank and means “there is more room to grow.”
Powell has led the Fed for just over a year. He virtually faced no pushback from Republicans on the Senate panel, as Janet Yellen, the former Fed chief, had in the past, that the central bank was courting inflation or financial risks by leaving the rates too low.
After increasing the rates four times last year, and anticipating more hikes this year, last January, the Fed turned to a “patient” stance as the concerns regarding the global economy took root, and the markets voiced doubts regarding the recovery of the U.S. economy.