WASHINGTON – The chairman of the United States Federal Reserve expressed optimism on Wednesday about the state of the world’s largest economy and said he did not anticipate any further interest rate cuts in the near future.
Although he cited risks such as a slowdown in global growth and the consequences of the ongoing US-China trade war, Jerome Powell said the central bank sees “sustained expansion of economic activity, a strong labor market and inflation” near the Fed’s 2 percent objective as the most likely scenario going forward.
“We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook,” Powell said in prepared remarks to Congress’s Joint Economic Committee.
The Federal Reserve chairman also told lawmakers that this “favorable baseline partly reflects the policy adjustments that we have made to provide support for the economy.”
After three consecutive 25-basis-point cuts, the Fed’s benchmark federal-funds rate currently stands at a target range of between 1.5 percent and 1.75 percent.
Powell’s monetary policy assessment contrasts sharply with that of President Donald Trump, who says the Fed has impeded US growth by not being more aggressive in lowering interest rates.
“As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high,” Trump tweeted in October.
“They are their own worst enemies, they don’t have a clue. Pathetic!” he added.
The Fed last lowered the federal-funds rate on Oct. 30, the same day the Commerce Department announced that US economic growth had slowed to annualized rate of just 1.9 percent in the third quarter, down from 3.1 percent in the first quarter and 2 percent in the April-June period.
The International Monetary Fund, for its part, has lowered its forecasts for US growth to 2.4 percent for this year and 2.1 percent in 2020.
Even so, other economic indicators – particularly an unemployment rate below 4 percent – indicate a strong US economy.
Separately, Powell warned about the risks of unrestrained government spending.
“The federal budget is on an unsustainable path, with high and rising debt. Over time, this outlook could restrain fiscal policymakers’ willingness or ability to support economic activity during a downturn,” he said.
The US federal budget deficit soared by 26 percent in the fiscal year that ended on Sept. 30 to $984 billion, its highest level in seven years, the Treasury Department said last month.
The year’s final meeting of the Federal Open Market Committee, the Fed’s policy-making body, is scheduled for Dec. 10-11.