This week, Fed Chair Jerome Powell sat down for an interview at the Economic Club of Washington, D.C. The interview was televised and featured an hour of questions ranging from the current state of the country’s economy to Powell’s concerns about global growth. We look at some of the main points made by the Chair of the Federal Reserve in today’s edition of the BAM Blog…
Overall, Jerome Powell had a lot of positive commentary about the current state of the U.S. economy. He noted that 2018 had been a very good year, with a strong labor market, low unemployment, and inflation near the target level. In fact, he said he might expect unemployment to move down another couple tenths this year. Although some have sounded warnings about a recession in 2019, Powell himself didn’t see the signs. He pointed out that typically there are other conditions present leading up to a recession, such as inflation high and continuing to rise, and situations like the .com bubble bursting, or the sub-prime mortgage debacle leading into the ’08 recession. Those combo-conditions just aren’t present, and Powell made clear that he wasn’t anticipating a recession looming on the horizon. Powell pointed out that it’s common for the economy to “behave unexpectedly,” at which point the Fed can move and react by adjusting policy to help keep the labor market strong. As for inflation predictions, Powell expects it to stick around 2% growth for 2019.
Looking back at the shadow cast by the Great Recession, Jerome Powell feels like the Fed did a lot of things right. He gave credit to the Fed and the former administration for reacting to what could have been globally catastrophic. Powell notes that he personally seeks accountability and transparency; and tries to explain a complex subject to an interested public, but in a comprehensive way. When the host referred to the jargon as “Fed speak,” Powell laughingly agreed that although it exists and is useful, it is often intimidating and confusing for non-economists seeking to understand complex financial matters. Powell said he also spends time engaging with the public and meeting with politicians who request it.
The Fed is Watching:
Powell said that while the country’s economy remains robust, some concerns involve the larger, integrated global economy. He’s paying attention to the slowing of the Chinese economy, where they’ve seen consumer spending begin to drop. Powell pointed out that the Chinese government has been proactive in trying to support the economy as much as they can during this reduction in growth. When asked about the current U.S. Government shut-down, Powell said that traditionally shut-downs haven’t lasted long enough to make a dent in the larger economy. He did acknowledge if this shut-down continues and becomes extended in duration, he would expect it to show up in the data. Another question involved the impending Brexit, and Powell noted that there was really no precedent against which to compare it. He did say that Brexit’s effect didn’t have to be significant. When it comes to major concerns, Powell named the country’s debt as something he’s “very worried” about. He called it more of a “long-run” issue” that didn’t fit into the medium-term plans the Fed has to handle.