USA economy likely to keep growing: Federal Reserve's Powell

Powell Sees Fed Resuming Balance Sheet Growth But It's Not QE

Powell Sees Fed Resuming Balance Sheet Growth But It's Not QE

"I leave you with this statement from Marriner, inscribed on a plaque in the Eccles Building: 'The management of the central bank must be absolutely free from the dangers of control by politics and by private interests, singly or combined, '" Powell said.

As Powell has stated before the US economic outlook is favorable, but there are risks to that outlook, mostly from global developments.

The "time is now" for the Federal Reserve to increase its security holdings to "maintain an appropriate level of reserves", Fed Chair Jerome Powell said in at speech at the National Association for Business Economics annual meeting in Denver.

"The Fed's purchases of treasury bills will resolve recent technical issues will not materially affect the stance of the monetary policy".

"It seems that Powell is trying to, in a soft way, demonstrate to the market that the Fed continues to be aware of the downside risks and is actively willing to support the economic expansion as needed", said Jason Ware, chief investment officer at Albion Financial Group in Salt Lake City, Utah.

The Fed had been shrinking its balance sheet in recent months as it unwound crisis-era bond buying programs. The U.S. dollar decreased to 0.9938 Swiss franc from 0.9946 Swiss franc, and it rose to 1.3318 Canadian dollars from 1.3309 Canadian dollars.

Mr. Powell provided fewer clues Tuesday about the central bank's plans to provide additional interest rate cuts after lowering its benchmark federal-funds rate for a second time in September, to its current range between 1.75% and 2%. Is it necessary and essential? Through an unconventional policy known as quantitative easing, the Fed more than quintupled the assets on its balance sheet to $US4.5 trillion between 2008 and 2015.

In his remarks Tuesday, Powell did not directly address the Fed's next steps on interest rates.

On monetary policy more broadly, Powell stuck to his recent script: He and his fellow policymakers view the economy as being strong but susceptible to shocks, particularly from a global slowdown, trade and geopolitics like a potentially messy Brexit. "It's nearly, your guess is as good as mine", he said.

The Fed raised its benchmark short-term rate four times past year, ending at a range of 2.25% to 2.5%.

The Fed has cut interest rates twice this year to shelter the US economy from weak global growth and trade-policy uncertainty. Traders see a 40% chance of a fourth rate cut in December. The Fed's next policy meeting is several weeks away "and we will be carefully monitoring incoming information", Mr. Powell said.

"We will be data dependent, assessing the outlook and risks to the outlook on a meeting-by-meeting basis".

While the Fed relies on economic statistics to determine its policy steps, Mr Powell noted that revised data showed recent USA job creation was significantly weaker than previously reported.

Mismeasurement of productivity may have actually understated growth in gross domestic product in recent years, Powell said.

The use of "big data" may help produce more accurate real time employment measures in the future, Powell said.

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