Fed's Powell Says U.S

Fed’s Powell Says Shutdown Hasn’t Hurt Economy Warns Long Layoff Could Do Damage

Minutes of the December meeting released on Wednesday showed that many officials felt the central bank "could afford to be patient about further policy firming", indicating the Fed could place interest rates on hold through March or longer as it waits for clarity on risks to global growth that could affect the US economy.

Speaking to an audience in Washington, D.C, Powell delivered the same reassuring message that bolstered markets last Friday.

Powell said that he had never met Trump before he was interviewed by the president in late 2017 for the Fed chairman's job.

Even so, US central bankers face a challenging year that's complicating their communication. "It's a tightly integrated economy and financial markets will see the effects of that", he said.

"We are in a place where we can be patient and flexible and see what does evolve", Powell said. Big picture: "they don't have that much further to go and they don't have to go there fast", said Robert Tipp, chief investment strategist with PGIM Fixed Income in Newark, New Jersey.

US 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.

In remarks at an appearance in Little Rock, Arkansas, on Thursday, St. Louis Fed President James Bullard was blunt, saying that the central bank had reached the "end of the road" in its current rate increase cycle.

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Powell seemed open to, though not enthusiastic, about a potential meeting with Trump.

Many business leaders remain optimistic about the U.S. economy this year, despite higher interest rates and large swings in the stock market. The Fed cut the rate to nearly zero during the financial crisis but has since raised it to a "neutral" level, meant to neither stimulate nor constrain the economy.

Powell noted that the Fed's holdings were around $1 trillion before the 2008 crisis.

"If we find that the ongoing program of balance sheet normalization or any other aspect of normalization no longer promotes the achievement of our dual-mandate goals, we will not hesitate to make changes, " Clarida said. Markets have expressed concerns that the Fed's operations to reduce the balance sheet could be depressing the markets and ultimately slow growth.

Still, Powell's comments and those of other officials "are developing a new narrative".

"Notwithstanding strong economic growth and a low unemployment rate, inflation has surprised to the downside recently, and it is not yet clear that inflation has moved back to 2 percent on a sustainable basis, " Clarida said.

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