In This Article:
(Adds Clarida comments)
By Howard Schneider and Jonathan Spicer
WASHINGTON, Jan 10 (Reuters) - Federal Reserve Chairman Jerome Powell on Thursday stressed again that the U.S. central bank can be patient in approving any further rate increases as officials gauge whether the U.S. economy will slow this year, as some in financial markets worry, or continue motoring ahead as the Fed itself expects.
Powell's second appearance in less than a week generated a subdued response in financial markets, a sign he may have found his footing in how to describe central bank policy without surprising investors. Several of his recent appearances have generated large market swings in both directions.
With no sign of excessive inflation or outsized risk in financial markets, Powell said the Fed would be "waiting and watching" in coming months.
"Especially with inflation low and under control, we have the ability to be patient and watch patiently and carefully as we ... figure out which of these two narratives is going to be the story of 2019," Powell said at the Economic Club of Washington.
The S&P 500 edged up 0.45 percent on Thursday, while yields on Treasury securities were unchanged. In contrast, his remarks in his three previous appearances since late November moved stocks an average of 2.4 percent in either direction, and his comments last Friday spurred the largest market reaction yet to any of his 17 public appearances since taking office last February. The S&P gained 3.43 percent, and the yield on the 10-year Treasury note rose 11 basis points.
In that appearance Powell emphasized the Fed's flexibility and patience in evaluating data, easing expectations of steady rate hikes in a message amplified by a half dozen other Fed officials in recent days.
In remarks at an appearance in Little Rock, Arkansas, on Thursday, St. Louis Fed President James Bullard was blunt, saying that the central bank had reached the "end of the road" in its current rate increase cycle.
Powell and others have been less demonstrative and noted that economic data remains strong, particularly after a recent payroll report that showed more than 300,000 jobs added in December.
The central bank's vice chairman, Richard Clarida, said later on Thursday that if the global slowdown and tightening of financial markets persists, the Fed would take policy steps to offset that. It would not want to wait too long to see overseas weakness affect the U.S. economy, he added.
Powell on Thursday also reiterated that, separate from what happens with interest rates, the Fed would continue allowing its nearly $4 trillion portfolio of bonds to shrink each month, to a level "substantially smaller" than it is now.