The Times said Powell hammered on two simple themes during an hour-long question-and-answer session before several hundred people at the Federal Reserve Bank of Dallas on Wednesday. He asserted that the Fed is doing its job and that the economy is doing really well.
He also added that “the Fed deserved credit for its role in the long and steady expansion. Our policy is part of the reason the economy is in such a good place now,” he said.
The president has repeatedly hammered the Fed for raising interest rates too quickly, describing the central bank as “crazy,” “loco,” “going wild” and “out of control.” Powell did not respond directly to these criticisms but rather made a point of saying twice that Congress is the Fed’s overseer.
“Our accountability is really to Congress,” and argued that tis has long been a hallmark of the Fed’s existence and a contributor to its ability to maintain monetary policy that aims to keep inflation stable and the economy running at maximum employment.
“We have a very important job that Congress has assigned us and we have the tools to do it,” he said. “We’re just trying to do our jobs and we’re doing fine.”
Powell answered questions posed by the Dallas Fed president, Robert S. Kaplan, and from members of the audience. He also acknowledged signs that global growth might be slowing but played down concerns about volatility in equity markets. He called stock prices “one of many factors” the Fed evaluates in making policy decisions.
The chairman also said the Fed is hearing a “rising chorus of concern” from businesses about the impact of the administration’s trade restrictions. Still, Powell cautioned that the Fed sees little evidence of a broad impact from the trade war in the economic data but pointed out that concerns about protectionism made sense in theory.
“If it winds up, perhaps inadvertently, in a place where we have more widespread protection, that would be bad for our economy,” he said. “To the extent that more and more products are subject to tariffs you could see a little bit higher inflation and a little bit slower growth.”
He also said the Fed was well aware that the benefits of the economic recovery have not been distributed evenly and that there are pockets of America that have yet to rebound from the recession. And he said there was a “broad consensus” among Fed officials that the central bank should keep raising its benchmark interest rate in the near term.
Investors expect an increase of one-quarter of a percentage point at the Fed’s next meeting in December although the recent volatility of financial markets has created “a little uncertainty” he said. Asset prices on Wednesday implied about a 73 percent chance of a December rate increase, the Times said.
The Fed also is expected to continue raising rates during the first half of 2019.
“It wouldn’t be surprising to me that we would need to go up again in December and at least a couple of times next year,” Mary Daly, the new president of the Federal Reserve Bank of San Francisco, said.
Chairman Powell did not comment on the timing of future rate increases, but his upbeat economic outlook is consistent with expectations that the Fed will continue to raise rates.
He also announced that he will hold news conferences after each of the Fed’s eight policymaking meetings next year, replacing the current pattern of quarterly news conferences. In recent years, the Fed has fallen into a pattern of announcing policy changes at meetings with a news conference. Powell said Wednesday that the Fed was reclaiming its ability to act at every meeting.
“The market is going to have to get used to that,” he said. “Certainly all meetings are live now. There’s no question about it now. I think over time folks will get used to the idea that we can and will move at any meeting.”
In his conference wrap-up, Powell returned to his two themes. “I want to leave on a note of optimism about our economy,” he said. “We’ve been through a difficult time and we’ve faced difficult times before. We’re in a good place now. I do believe our economy can grow and grow faster.”
And, he added, the Fed is doing a good job.
So, we will see. Not everyone is as big a fan of the recent Fed policy as Chairman Powell is, but his defense of somewhat tighter monetary policy to avoid potential inflation likely will be seen as reassuring to many investors — along with his pledge for more transparent policy making for the Fed. The monetary policy debate certainly is important and should be watched closely by producers as it proceeds, Washington Insider believes.