Published: Fri, January 11, 2019
Money | By Ralph Mccoy

Powell repeats pledge to remain 'patient' with rate hikes

Powell repeats pledge to remain 'patient' with rate hikes

Federal Reserve Chairman Jerome Powell on Thursday (Jan 10) stressed again that the USA central bank can be patient in approving any further rate increases as officials gauge whether the US economy will slow this year, as some in financial markets worry, or continue motoring ahead as the Fed itself expects.

The balance sheet "will be substantially smaller than it is now", though bigger than it was before the crisis, Powell said.

After four rate hikes past year, the Fed would be "bordering on going too far and possibly tipping the economy into recession" if rates go higher, Bullard said, adding that he would be willing to cut interest rates if needed.

The Fed chair, who has been publicly criticised repeatedly by President Donald Trump in recent months, warned that if there is an "extended shutdown", it would have an impact on the economy that "would show up in the data very clearly".

Moving ahead, today's U.S. economic docket, highlighting the release of the latest USA consumer inflation figures, will influence the United States dollars price dynamics and produce some meaningful trading opportunities later during the early North-American session.

Powell said last week that he's "listening sensitively to the message that markets are sending" about downside risks.

He also said that the Fed had no preset path for rate hikes and would be "patient" when determining whether to hike interest rates further in response to strong US growth that risks sparking inflation, or to pause rate hikes to account for a global economic slowdown.

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The monthly reductions, effectively running on autopilot, have been criticized by some as a steady tightening of financial conditions the Fed should reconsider. Traders were already wary of statements Powell made in December about rate hikes.

The Fed chief was also asked about the partial USA government shutdown.

"I don't see anything that suggests the possibility of a recession in the near term is at all elevated", he said. "The principal worry is global growth", he said.

Powell also said he didn't think it would be appropriate to reject an invitation to meet with Trump, but he hasn't yet received such an invitation. The unemployment rate stands at 3.9 per cent and central bankers expect it to average 3.5 per cent in the final three months of this year.

At the same time, Powell said there are concerns in financial markets about slowing global growth and rising trade tensions.

In remarks at an appearance in Little Rock, Arkansas, on Thursday, St. Louis Fed President James Bullard was blunt, saying that the central bank had reached the "end of the road" in its current rate increase cycle.

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