Fed emphasizes ‘solid’ U.S economic growth, repeats gradual approach
WASHINGTON (Reuters) – The government Reserve on Friday pointed to "solid" U.S. economic growth throughout the first 1 / 2 of the entire year in the semi-annual report back to Congress, where it also reiterated who’s supposed to carry on and raise rates gradually.
It will be the Fed's second submission to lawmakers since Chairman Jerome Powell took the helm of the Fed during early February. He will be scheduled to reply to questions in it before lawmakers on Tuesday and Wednesday.
Details within the 63-page report were consistent with the Fed's current outlook detailed at its policy meetings, which happens to be that strong economic growth and low unemployment require rate rises but a deficiency of severe inflation pressures means they could remain gradual. Markets were little moved following a turmoil the report.
"Above the first 1 / 2 of this holiday season, overall business activities appears to have expanded on a solid pace," the Fed said, adding the economy may be based on favorable consumer and business sentiment, past increases in household wealth, solid economic growth abroad, and accommodative domestic financial conditions.
As such the Fed "expects that further gradual increases" in interest levels could be appropriate the way it strives to keep at it to nurture an economic expansion that is the actual second-longest on record.
The Fed said that the Trump administration's package of tax cuts had likely led to a rebound in consumer spending with a sluggish start to the entire year all of which will likely provide a moderate boost to economic growth at the moment.
The relatively rosy picture within the U.S. economy seemed to be referenced by Powell within the interview on Thursday during which he explained he believes the U.S. economy remains in a very "truly great place" with recent government tax and spending programs set to increase gdp for perhaps 3 years.
The Fed has raised interest levels seven times because it began a tightening cycle the government financial aid December 2019 and last lifted its benchmark lending rate by using a quarter percentage part of mid June. The Fed sees another two rate hikes by year end.
TRADE TENSIONS AFFECTING MARKETS
The central bank barely weighed in about the potential impact within the Trump administration's protectionist trade policies, but noted how the uncertainty around them had been a concern to stock markets.
Powell said on Thursday that sustained high tariffs on goods and services could hurt the economy plus a number of policymakers have fretted that trade disputes with Europe, Canada, Mexico and China could slow business investment.
"What's transpiring inside growing process certainly isn’t positive," Dallas Fed President Robert Kaplan said in a interview with Reuters on Friday, adding he would should downgrade his outlook if tensions between your United states of america and its trade partners escalate.
Trump has imposed or threatened tariffs on $250 billion of Chinese goods and riled key allies by imposing steel and aluminum tariffs on Europe, Canada and Mexico. He’s also threatened to tax European car imports.
"We don't see anything too surprising," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in White Plains, Big apple, on the report. "In brief, Fed officials anticipate continued gradual tightening, assuming no major fallout from trade tensions."
Elsewhere within the report, policymakers just as before flagged that wage growth continues to be weaker compared to they would’ve expected considering the current unemployment rate of four years old percent.
Wage gains are actually "moderate," the report said, likely held down by weak productivity, but it highlighted the chance that there might be some more slack inside labor market, with increased prime-age workers poised to type in the workforce "if labor demand remains strong."
The Fed showed little worry about financial stability, saying Treasury markets were broadly stable there was minimal proof of liquidity pressures. However, it noted valuations were elevated for most assets and that economic slowdown could amplify vulnerabilities for lower-rated corporates.