Federal Reserve Chairman Jerome Powell signaled Wednesday the central bank may not lower interest rates again this year following three consecutive cuts.
âWe see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2% objective,â Powell told members of the Joint Economic Committee in his opening statement during a hearing.
He noted, however, that âif developments emerge that cause a material reassessment of our outlook, we would respond accordingly.â
Powell is testifying before the Joint Economic Committee, a bicameral panel composed of 20 lawmakers, about the economic outlook.
The Fed chair, tapped by President Trump to replace Janet Yellen last year, told lawmakers the central bank predicts âsustained expansion of economic activityâ and a strong labor market but warned ânoteworthy risksâ to the positive economic outlook remain, including slow global growth and trade developments.
The central bank raised interest rates four times last year but has cut short-term rates three consecutive times, beginning in July amid sluggish global growth and ongoing trade tensions. The most recent rate cut, approved last month, brought the target for short-term interest rates to a range of 1.5% to 1.75%.
Powell told committee members that in the last year, a weakening of the global economy, the ongoing trade war, and muted inflation pressures led the central bankâs policy-making committee to âadjust its assessment of the appropriate path of interest rates.â
The Fed is not expected to lower rates further when its policy-making committee meets again Dec. 10-11, though Trump has repeatedly called for the central bank to lower rates.
Powell urged Congress to prepare fiscal policy to support the economy in the event of a downturn, and warned the federal budget “is on an unsustainable path, with high and rising debt.”
High and rising federal debt, he added, can reduce productivity and economic growth.
“Putting the federal budget on a sustainable path would aid the long-term vigor of the U.S. economy and help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy if it weakens,” Powell said.
During a press conference announcing the rate cut last month, Powell cited positive developments in factors that have been risks to the economic outlook. Trade tensions between the United States and China lessened after Trump announced a phase one trade deal between the worldâs two largest economies. Powell also said it appears less likely the United Kingdom will exit the European Union without a deal.
Although the economy is in its 11th year of expansion, economic growth slowed to a rate of 1.9% in the third quarter of 2019, far below Trumpâs target of 3% annual economic growth. But the unemployment rate has continued to hover near a 50-year low, and the economy added 128,000 jobs in October, exceeding estimates.
