Powell Says Fed Is 'Waiting and Watching' With Patience on Rates

Is it time to invest in gold

Is it time to invest in gold

He said an "extended" shutdown would show up in economic data "pretty quickly" and, since it shutters some agencies that provide economic data, it would also make the picture of the economy less clear for the Fed.

Federal Reserve Chairman Jerome Powell said the US central bank can be patient before adjusting interest rates again as it waits to see how global risks impact the domestic economy.

"Especially with inflation low and under control, we have the ability to be patient and watch patiently and carefully as we. figure out which of these two narratives is going to be the story of 2019", Powell said at the Economic Club of Washington.

Powell was also asked about the Fed's plans to keep trimming its holdings of Treasury bonds and mortgage-backed securities, which it had purchased following the 2008 financial crisis as a way to keep long-term interest rates low and support an economy as it struggled to climb out of the worst recession since the 1930s.

The FTSE 100 is on track for its best week in three months after global stocks were lifted by reassurances from the US Federal Reserve that it could be patient about interest rate rises.

Powell said that he had never met Trump before he was interviewed by the president in late 2017 for the Fed chairman's job.

Speaking to an audience in Washington, D.C, Powell delivered the same reassuring message that bolstered markets last Friday.

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The Fed chair will be taking questions in what will be his first major comments since the central bank took a decidedly more cautious tone about its future pace of interest rate hikes. He said he didn't know the exact level. Bloomberg's financial conditions index has retraced much of its December tightening.

The head of the Federal Reserve also warned that while his department has no official projection on the current government shutdown, it can still have a damaging effect on the national economy.

At the same time, Powell acknowledged that financial markets are expressing concern about risks.

"The principle worry I would have is really global growth", Powell said, but he added: "I still think the mostly likely baseline case for China is another year of solid growth".

Trump stepped up his criticism of the Fed's string of rate hikes past year after the market started falling sharply in October.

While there is wide agreement that the U.S. economy will grow more slowly than the roughly 3 per cent rate of 2018, there's a lot of debate about how fast the slowdown will be.

Even so, USA central bankers face a challenging year that's complicating their communication.

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