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Powell: Federal Reserve has interest rates 'well positioned'

Brian Cheung
Reporter

Federal Reserve Chairman Jerome Powell said Monday night that the current level of interest rates should sustain the economic expansion in the United States, signaling that no more rate cuts are likely at the moment.

At a speech in Providence, R.I., Powell said the central bank’s three consecutive rate cuts this year have left interest rates at a level “likely to remain appropriate.” The target federal funds rate is now in the range of 1.50% to 1.75%.

“At this point in the long expansion, I see the glass as much more than half full,” Powell said in Providence. His speech wrapped up a day of meetings in East Hartford, Connecticut, where Powell toured the local community’s workforce development initiatives.

Powell said that while he saw monetary policy as “well positioned,” he reiterated that policymakers are not on a “preset course” and said the Fed’s path on rates could change if there were a “material reassessment” of economic conditions.

Powell’s commentary echoes his remarks to Congress less than two weeks ago, when he told lawmakers that “there’s no reason” why the economic expansion, now the longest in American history, can’t continue. His testimony similarly described interest rate levels as “likely to remain appropriate.”

Powell continued to point to tepid inflationary pressures, weakening global growth, and trade developments as risks that the central bank hoped to hedge against by cutting rates by a total of 75 basis points this year.

‘Far from dull’

U.S. Federal Reserve Chair Jerome Powell and Federal Reserve Bank of Boston President Eric Rosengren attend a presentation by the East Hartford CONNects, a Working Cities Challenge initiative, and community residents' project at Silver Lane Elementary School in East Hartford, Connecticut, U.S., November 25, 2019. REUTERS/Brendan McDermid

But Powell noted that the full effects of those cuts have not been realized yet, adding to the argument that the Fed should pause on further rate cuts while it assesses the effects of its easing.

“The full effects of these monetary policy actions will be felt over time, but we believe they are already helping to support consumer and business sentiment and boosting spending in interest-sensitive sectors, such as housing and consumer durable goods,” Powell said.

Looking back on 2019, Powell acknowledged that monetary policy decisions have been “far from dull.” During the year, the Fed shifted from a commitment to gradual rate hikes, to a pause on interest rate changes, and then to easing policy. 

But through those changes, Powell said the “favorable” outlook from policymakers has not changed much. Powell said the Fed’s pivot to easing helped “keep the favorable outlook on track.”

Powell said letting the economy run has benefited low- and middle- income households, which have seen more rapid wage growth relative to other income groups. Powell said extending the economic expansion will ultimately bolster the “half full” view of the U.S. economy.

“With the right policies, we can fill it further, building on the gains so far and spreading the benefits more broadly to all Americans,” Powell said.

The Fed’s final policy-setting meeting for 2019 will take place December 10 and 11.

Brian Cheung is a reporter covering the banking industry and the intersection of finance and policy for Yahoo Finance. You can follow him on Twitter @bcheungz.

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