WASHINGTON, DC – The Latest on Federal Reserve Chairman Jerome Powell’s testimony before the Joint Economic Committee about the outlook for the U.S. economy (all times local):
Federal Reserve Chairman Jerome Powell says two major long-term issues facing the U.S. economy are sluggish productivity growth and low participation rates in the job market by prime-age workers.
Powell says that the United States currently lags most major industrial countries in the percentage of workers in prime working ages who are in the labor force. He says one hopeful sign is that this participation rate is finally beginning to move higher, but more needs to be done.
“We lag just about every wealthy country in the world in labor force participation and that is not where we should be,” Powell said Wednesday in testimony before the congressional Joint Economic Committee.
He said “many things” can be done to address this problem such as funding programs to deal with the opioid crisis and increased job training programs.
Federal Reserve Chairman Jerome Powell says that the unemployment rate, already near a 50-year low, could drop further without necessarily igniting higher inflation.
“The data is not sending any signal that the labor market is so hot or that inflation is moving up,” he said in response to a question from Rep. Carolyn Maloney, vice chair of the Joint Economic Committee. “What we have learned ... is that the U.S. economy can operate at a much lower level of unemployment than many thought.”
Historically, super-low unemployment has been seen as likely to push up inflation, as workers push for higher pay and companies offer greater salaries to find and keep workers. Powell’s optimism about unemployment and inflation suggest that the Fed is unlikely to feel any need to raise rates anytime soon.
Private economists say Federal Reserve Chairman Jerome Powell is sending a strong signal that the central bank is not planning further interest rate cuts unless the economy weakens.
Sal Guatieri, a senior economist at BMO Economics, says Powell “stayed true to the patience script” by indicating that that the Fed’s key policy rate is likely to remain unchanged for an extended period unless economic risks increase.
Andrew Hunter, senior U.S. economist at Capital Economics, said Powell’s testimony on Wednesday indicated that a rate cut at the Fed’s next meeting in December was unlikely. Hunter said he believed Fed officials have been encouraged by more hopeful news on the US-China trade talks.
The Fed has cut interest rates three times so far this year.
Powell says in written testimony that the Federal Reserve is optimistic about the U.S. economy, though it still faces risks from slower growth overseas and trade tensions.
“Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2% objective as most likely,” Powell said in a statement he will deliver to a congressional panel at 11 a.m.
Powell also says the Fed is likely to keep its benchmark short-term interest rate unchanged in the coming months, unless the economy slows enough to cause Fed policymakers to make a “material reassessment” of their outlook.
Federal Reserve Chairman Jerome Powell is due to testify Wednesday in Congress about the outlook for the U.S. economy, giving his perspective two weeks after the Fed cut interest rates for a third time this year.
The Fed signaled after its Oct. 29-30 meeting that it would probably hold off on any further cuts as long as the economy stays healthy and inflation moves closer to the central bank’s target of 2%.
The three cuts, which lowered the interest rate the Fed controls to a range of 1.5% to 1.75%, were intended to offset drags from slower global growth and the U.S.-China trade war.