Federal Reserve chairman Jay Powell will tell US lawmakers on Wednesday that he sees little reason to lower interest rates in December, despite coming under renewed pressure from President Donald Trump to loosen monetary policy.
According to prepared remarks to be delivered to the US Senate’s Joint Economic Committee, Mr Powell said that the current stance of monetary policy would probably remain appropriate “as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labour market, and inflation near our symmetric 2 per cent objective”.
Mr Powell also reminded lawmakers that if a downturn were to come, government spending would be an important policy tool, for which it has responsibility. But he warned that the current path of rising federal debt could make it difficult for Congress to act.
The remarks suggest that the central bank’s outlook has not changed since its last monetary policy meeting in October and that the Fed’s rate-setting committee is likely to leave its interest rate target range unchanged at 1.5 to 1.75 per cent in December, when it next meets.
The Fed has lowered its policy rate by 75 basis points this year. Mr Powell has described the cuts as a response to low inflation and the uncertainty over trade that was holding down global growth and US business investment.
But at its October meeting, the Fed’s Open Market Committee hinted strongly that it would pause before making any more changes, to monitor economic data as it waited for the cuts to take effect. Market bets on future Fed policy rates compiled by the CME Group show that investors do not expect the Fed to change rates in December.
The publication of Mr Powell’s testimony looked unlikely to change that expectation and generated only a muted reaction in financial markets. It was also likely to disappoint Mr Trump, who in a speech in New York on Tuesday asked the Fed to compete with more aggressively with negative interest rates offered in Europe and Japan.
“Give me some of that money,” the president said in New York. “I want some of that money. Our Federal Reserve doesn’t let us do that.”
Mr Powell described an economy in its 11th year of expansion, with an outlook that “remains favourable”. As he has in the past, he pointed out that an extended run of low unemployment has encouraged people to return to the workforce, and that the strongest wage gains were going to the lowest-paid workers.
The Fed chair also cited the return to growth in the third quarter in residential real estate, likely a response to the lowered mortgage rates that followed the Fed’s cuts.
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