During the first part of Federal Reserve Chair Jerome Powell’s Monetary Policy Report, Powell reported that the U.S. Economy is currently in a “very good place,” citing the 11th consecutive year of economic expansion, as well as a moderate increase in activity and a strengthened labor market.
Powell has said that he does not believe that the markets are at risk of a recession.
“I don't think so and I certainly hope not,” Powell said. “There’s no reason why the expansion can’t continue. There’s nothing about this expansion that is unstable or unsustainable."
On Monetary Policy, Powell noted that the Federal Open Market Committee (FOMC) believes that the current stance of monetary policy will support continued economic growth, a strong labor market, and inflation returning to the Committee's symmetric 2% objective.
“Taking a longer view, there has been a decline over the past quarter-century in the level of interest rates consistent with stable prices and the economy operating at its full potential,” Powell said. “This low interest rate environment may limit the ability of central banks to reduce policy interest rates enough to support the economy during a downturn. With this concern in mind, we have been conducting a review of our monetary policy strategy, tools, and communication practices.
“Public engagement is at the heart of this effort,” he added.
During his testimony, Powell also noted that the Fed will be “closely monitoring” the coronavirus and its impact on global economic growth. Despite the threat from the virus, he said Fed policy is well positioned after a series of rate cuts in 2019.
“As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate,” he said.
Powell’s testimony will continue on Wednesday, February 12.