Fed will be patient with rate hikes - Powell

Credit: Reuters Studio
Published on February 26, 2019 - Duration: 02:01s

Fed will be patient with rate hikes - Powell

Rising risks and recent soft data shouldn't prevent solid growth for the U.S. economy this year, but the Fed will be patient with rate hikes, said Fed chairman Jerome Powell.

Fred Katayama reports.

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Fed will be patient with rate hikes - Powell

Federal Reserve chairman Jerome Powell testified before the Senate Banking Committee about the state of the U.S. economy.

He said it's doing well, but it's growing slower, and the Fed will take its time raising interest rates.

(SOUNDBITE) (English) U.S. FEDERAL RESERVE CHAIRMAN, JEROME POWELL, SAYING: "So, we look around, and what do we see?

We see a labor market that is strong and continuing to strengthen.

Job creation is strong.

Wages are moving up.

So, that's a very healthy thing.

With inflation, we see it in muted inflation pressures, even now with the really historically low unemployment and a great recovery, an ongoing recovery, in the labor markets, we still see muted inflation pressures, and that gives us the ability to be patient with monetary policy.

And that's what we're going to do." On the list of risks, Powell put slowing global growth, especially China and Europe, and, to a limited extend, Brexit.

He also said uncertainty surrounding trade negotiation doesn't help businesses.

And he mentioned the need to deal with, as he put it, unsustainable federal debt.

During Powell's testimony, U.S. Treasury yields ticked up modestly, including that of the two-year benchmark.

The S&P 500 pared earlier losses and was trading flat around midday.

Catalyst Funds chief investment officer, David Miller: (SOUNDBITE) (English) CATALYST FUNDS, CHIEF INVESTMENT OFFICER, DAVID MILLER, SAYING: "The Fed really realized the mistake that they made back in Q4 when they had an unprecedented move of trying to hike rates quickly while simultaneously unwinding the balance sheet in a big way.

And clearly that really spooked the markets and now they've taken a much more cautionary tone and expressed that the economy is still doing well.

Yet there are some cautionary signs on the horizon that's really comforted the market that everything's going to be all right that they're not going to raise rates or unwind the balance sheet too quickly from here." Powell is scheduled to appear before the House Financial Services Committee later in the day.

His hearings on Capitol Hill follow months-long criticism from U.S. President Donald Trump.

Trump has repeatedly urged the Fed to stop hiking rates and reducing its bond holdings.

He has also said the central bank's policies are jeopardizing economic growth.

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