Jerome Powell, chairman of the U.S. Federal Reserve, listens during a Financial Stability Oversight Council (FSOC) meeting at the U.S. Treasury in Washington, D.C. (Photographer: Andrew Harrer/Bloomberg)

Powell Says Fed Policy Is Appropriate, Sees No Hurry to Change

(Bloomberg) -- Federal Reserve Chairman Jerome Powell said interest rates can remain on hold as the U.S. central bank waits to see how conditions abroad evolve, signaling that there’s no clear time limit to the Fed’s current pause.

“Inflation is muted and our policy rate we think is in an appropriate place,” Powell said in a wide-ranging interview that aired Sunday on CBS News’ “60 Minutes.” He called the current rate setting “roughly neutral” -- meaning its neither stoking nor slowing growth -- and tried to define the Fed’s stance of patience while reviewing fresh data.

“Patient means that we don’t feel any hurry to change our interest rate policy,” he said.

Powell’s comments come at a time when the U.S. economy looks solid, inflation is just shy of the Fed’s 2 percent goal, and unemployment is at its lowest level since the 1960s. Still, the Fed in January pivoted from hiking rates to taking a pause amid tighter financial conditions and as risks emerged abroad.

Asked what it would take for the Fed to move borrowing costs up or down, Powell said he and his colleagues will be looking at growth, job creation, wages and inflation domestically, and will keep an eye on China, Europe and events including Britain’s ongoing exit negotiations with the European Union.

“We’ll be putting that all together and deciding when it will be appropriate to change our policy,” Powell said. “What’s happened in the last 90 or so days is that we’ve seen increasing evidence of the global economy slowing down” and “we’re going to wait and see how those conditions evolve before we make any changes to our interest-rate policy.”

Powell Says Fed Policy Is Appropriate, Sees No Hurry to Change

Powell, Vice Chairman Richard Clarida, Governor Lael Brainard and New York Fed President John Williams have all recently signaled their contentment with letting the policy rate rest at 2.25 percent to 2.5 percent when they meet March 19-20, and perhaps even beyond that. Fed officials will submit new rate and economic forecasts at the March FOMC meeting, and those projections could offer clues about whether they still anticipate raising rates later this year.

Investors took Powell’s latest comments in stride, with futures on the S&P 500 Index remaining steady in early Monday trading in Asia.

Interview Tradition

Powell’s predecessors have also been interviewed by CBS in the past, and at critical junctures. Janet Yellen did an exit interview with CBS’s Rita Braver, and Ben Bernanke appeared on “60 Minutes” as the Fed grappled in 2009 and 2010 with a severe recession and its aftermath.

The prime-time show, which has run for more than 50 years, has drawn weekly audiences of 8 million to 11 million this year, according to Nielsen figures, making it an important way to communicate with the broader U.S. public.

Powell isn’t facing an economic crisis -- the U.S. posted solid growth of 3.1 percent in 2018, and the expansion, now in its 10th year, is set to become the longest on record at midyear.

“The outlook for the U.S. economy is favorable,” Powell said. “The principal risks to our economy now seem to be coming from slower growth in China and Europe and also risk events such as Brexit.”

But Powell’s evolving public outreach comes as the Fed combats political concerns. The U.S. is heading into a presidential election season at a time when the central bank has transitioned from stimulating the economy to trying to stabilizing it. The Fed has also designated 2019 as a year to review its monetary policy strategy, tools and communication.

Trump’s Criticism

On Twitter and in speeches, President Donald Trump has repeatedly lambasted the Fed chief he installed in February 2018 for raising interest rates last year, culminating with a fourth hike in December. U.S. stocks suffered their worst December since the Great Depression. In January, the Fed shifted to a more patient stance on rate moves amid below-target inflation.

Trump backed away from his commentary for a time, and had a dinner with Powell in February in which the pair discussed the economy, but not monetary policy. The president renewed his criticism a week ago, though, in a speech to a conservative gathering, referring to the Fed chief as “a gentleman who likes raising interest rates.”

“I don’t think it’s appropriate for me to comment on the president,” Powell said when asked about Trump’s criticism. But Powell also said he doesn’t think the president has the authority to fire him. “The law is clear that I have a four-year term. And I fully intend to serve it.”

Inflation Worries

Asked whether the Fed will allow inflation to drift above the central bank’s 2 percent target, Powell pointed out that inflation has mostly been below that level.

“That’s something that is worth thinking about, because we want inflation expectations to be anchored at around 2 percent,” Powell said. “I think we’ll always be moving inflation back to 2 percent with our policy. But I think we do that in a symmetric way.”

Powell identified cyber-security as a major risk that the Fed works on constantly, and said the Fed is carefully watching leveraged lending to corporations.

“If there were a downturn, having highly leveraged companies would be an amplifier,” he said. “I don’t think it’s the kind of thing that we saw in the financial crisis.”

Asked about income disparity in the U.S., he said that the Fed doesn’t have direct responsibility for that issue, but that it’s important nonetheless. The U.S. has “relatively low mobility,” he noted.

“The chances of making it from the bottom to the top in the United States are lower than they are in many other comparable countries,” Powell said. “That is not our national self-image.”

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