Published: Sat, January 12, 2019
Money | By Bruce West

Fed chair is ‘very worried’ about ballooning debt U.S. will inevitably face

Fed chair is ‘very worried’ about ballooning debt U.S. will inevitably face

"If we have an extended shutdown, I do think that would show up in the data pretty clearly", Powell stated.

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

"I'm very anxious about it", the Fed chief told participants of The Economic Club of Washington, DC on Thursday.

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 Fed has projected two more rate hikes, but Powell is now signaling the Fed will be "patient" on any further hikes.

"Chairman Powell chose to make no news at his latest interview".

But Fed Chairman Jerome Powell also sought to reassure financial markets last week, saying policymakers will be "patient" before making any further moves as they watch to see how the economy evolves and could react quickly to any changes. He said the Fed's aim was to return the balance sheet to a "more normal level" but didn't specify what that level will be.

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.

On Thursday, Powell said he hasn't seen anything to indicate that the risk of a recession is elevated. "The principal worry we have is global growth" in Asia, Europe and elsewhere.

He also anxious about the lack of key economic statistics during the government shutdown that the Fed uses to take the temperature of the economy. He added the Fed will have "a less clear picture" on the state of the national economy as during the shutdown the government agencies will not be able to release some vital data, including retail sales and GDP figures.

Powell and others have been less demonstrative and noted that economic data remains strong, particularly after a recent payroll report that showed more than 300,000 jobs added in December.

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

The U.S. central bank raised rates four times previous year in the face of robust economic growth and unemployment that touched its lowest level in half a century.

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