Powell’s Humphrey Hawkins Testimony

February 26, 2019

Fed Chairman Powell statement before the Senate Banking Committee presents a decent baseline view of the U.S. economy, observing a strong labor market and projecting inflation around the 2% target once some transitory depressants pass.

However, the following two paragraphs lay out a number of undesirable short-term and longer run developments that ought to be addressed:

Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year. Growth has slowed in some major foreign economies, particularly China and Europe. And uncertainty is elevated around several unresolved government policy issues, including Brexit and ongoing trade negotiations. We will carefully monitor these issues as they evolve.

In addition, our nation faces important longer-run challenges. For example, productivity growth, which is what drives rising real wages and living standards over the longer term, has been too low. Likewise, in contrast to 25 years ago, labor force participation among prime-age men and women is now lower in the United States than in most other advanced economies. Other longer-run trends, such as relatively stagnant incomes for many families and a lack of upward economic mobility among people with lower incomes, also remain important challenges. And it is widely agreed that federal government debt is on an unsustainable path.

The Q&A portion of the Fed Chairman Powell’s testimony has been politically partisan as is typical of congressional proceedings, with each Democrats and Republicans attempting to elicit remarks from Powell that would cast dispersion on the other party. During the testimony, the 10-year Treasury yield dipped two basis points on balance, while share prices swung back and forth but currently show little net changed for the day.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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