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On Friday, after the markets had closed, Fed Chair Powell acknowledged downside risks to the economic outlook have increased, citing  global disinflationary pressures, but added there was nothing in the outlook requiring an immediate policy response. He suggested the dot-plot communications could be made clearer. He was also on 60 minutes today,  repeating that the economy is in good place and rates are ‘appropriate’ given muted inflation:

Key comments:

  • Powell says Fed does not ‘feel any hurry’ to change interest rates again, will wait to see how global conditions evolve before making any changes.
  • Powell says policy rate now ‘roughly neutral’.
  • Powell says does not think president Donald Trump has power to fire him.
  • Powell says not appropriate for him to comment on trump’s criticism of the Fed.
  • Powell-recent pause in interest rate hikes not related to trump’s remarks about rate policy; says fed ‘will never, ever take political considerations’ into account.
  • Powell, noting chinese steps to support growth, says does not think ‘very negative’ outcomes are most likely scenario for the global economy.
  • Powell says though the European economy has ‘slowed substantially,’ still feel there will be ‘materially positive’ growth.
  • Powell says U.S. Outlook remains positive across many measures with ‘healthy’ rate of growth expected for 2019.
  • Powell says sees main risks to U.S. Coming from abroad.
  • Powell says financial conditions ‘generally healthy’.
  • Powell says does not see much evidence of 90s style ‘irrational exuberance,’ with credit spreads, and some stock market valuations at ‘normal’ long-term levels.
  • Powell again cites leveraged corporate lending as area of concern that is being ‘actively monitored’ by fed and could amplify extent of any downturn.
  • Powell says consumers, and consumer credit are generally healthy, says large number of auto loan defaults a product of the fact that the number of auto loans is much higher.
  • Powell says watching retail sales after weak December but says some evidence that sales rebounded in January.
  • Powell says would be a challenge to achieve 4 percent growth in the u.S. Given slow growth of workforce in an aging population.
  • Powell says Fed would not overreact to inflation modestly above 2 percent.
  • Powell says cyber attack ‘the largest’ risk faced by the financial system.
  • Powell says major concern would be an attack that managed to ‘take down’ an institution or payment system for an extended period of time.
  • Powell says now at the point where large banks can be unwound in an orderly way.