13 January, 2019
The Fed chair also warned that if an "extended shutdown" took place, the impact on the economy "would show up in the data pretty clearly". He also said he would "be patient" as the central bank determines when to hike interest rates next.
US stocks initially turned lower after Powell said the central bank is sticking with its process of shrinking its balance sheet to a more normal level, which removes stimulus put into place to revive the economy following the financial crisis and recession a decade ago.
The Dow Jones Industrial Average posted a five-day winning streak-its longest such streak since September-after Federal Reserve Chairman Jerome Powell said he was taking a patient approach of "waiting and watching" on interest rates. In October, it rose 0.3 percent.
Even so, USA central bankers face a challenging year that's complicating their communication. Big picture: "they don't have that much further to go and they don't have to go there fast", said Robert Tipp, chief investment strategist with PGIM Fixed Income in Newark, New Jersey. Traders were already wary of statements Powell made in December about rate hikes.
"If we find that the ongoing programme of balance sheet normalisation or any other aspect of normalisation no longer promotes the achievement of our dual-mandate goals, we will not hesitate to make changes, " Clarida said. "That was conditional on a very strong outlook for 2019, an outlook that may still happen".
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The U.S. central bank raised rates four times past year in the face of robust economic growth and unemployment that touched its lowest level in half a century.
Mr. Clarida said monetary policy, after four rate increases a year ago, isn't on "preset course".
December figures for the Fed's preferred gauge of inflation - a separate measure related to consumption - are scheduled for release on January 31, though the report could be delayed because of the partial government shutdown.
While markets may be concerned about global trade tensions and slower growth overseas, Powell said there is no evidence of a USA recession on the horizon. The principal worry is global growth, he said in questioning by David Rubenstein, the co-founder of private-equity firm Carlyle Group, where Powell was previously a partner.
During an interview at The Economic Club of Washington, D.C., Powell said that continued shutdown stopped some of the data feed that the Fed needed, making the outlook of USA economy less clear, thus complicating policy-making.