Fed's Powell again stresses patience as USA economy's 'narrative' unfolds

GS financial conditions index

He allayed fears of any imminent further interest rate rises while it continues to shrink its balance sheet to a more normal size. Core CPI is 2.2 percent higher, exactly where it was in November.

Federal Reserve Chairman Jerome Powell said the USA central bank can be patient before adjusting interest rates again as it waits to see how global risks impact the domestic economy.

Powell also noted that it's a problem that the Commerce Department is mostly shuttered, which means key economic data such as retail sales and growth in gross domestic product won't be released later this month unless the government reopens.

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.

USA central bankers are refining their message after the hawkish tone of their December 19 statement and forecasts for further rate hikes in 2019 roiled financial markets.

Powell's comments on Fed patience were similar to the message in the minutes of the Fed's December meeting as well as the comments of other Fed officials this week.

"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 when asked at the Economic Club of Washington about December forecasts from Fed policymakers showing they expect a median of two more rate hikes in 2019, after four a year ago.

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"There is no such plan", Powell said. "That was conditional on a very strong outlook for 2019, an outlook that may still happen".

That could support consumer spending, which accounts for about 70 percent of the USA economy, at a time when the outlook is dimming for companies in a variety of industries.

Fed officials and many forecasters expect growth to slow in 2019, but to remain strong enough to continue generating jobs and keeping the unemployment rate near its nearly 50-year low.

Since then, stock markets endured a topsy-turvy end to the year as the USA government shut down and global trade tensions ratcheted higher.

"There is no pre-set path for rates. particularly now", he said.

December figures for the Fed's preferred gauge of inflation - a separate measure related to consumption - are scheduled for release on January 31, though the report could be delayed because of the partial government shutdown.

"The principle worry I would have is really global growth", Powell said, but he added: "I still think the mostly likely baseline case for China is another year of solid growth".

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