Chairman Powell before Congress: Praising the economy and rebutting the President


Federal Reserve Chairman Jerome Powell will repeat in Congress the policy message he delivered after the last FOMC meeting, the US economy is in a good place in the 11th year of the country’s longest expansion.

Mr. Powell will present a short statement and answer questions twice this week, on Wednesday before the Joint Economic Committee and on Thursday in front of the House Budget Committee.  

He will reaffirm the policy change to neutral at the October open market committee meeting after the governors lowered the fed funds rate for the third time to a 1.75% upper target.

In his news conference last month Mr. Powell noted that of the three risks facing the US economy which had prompted the Fed  “insurance policy,”  the slowdown in global growth, China trade and Brexit, two, trade and Brexit, had moved closer to solution.

“The principal risks we have been monitoring have been slowing global growth and trade. We now have a potential trade agreement with China...which could bode well for business activity over time. ..It appears as well, that the risk of a no deal Brexit has...subsided,” he said.

Markets appear to agree with the Fed assessment.  In the US the three major equity averages have reached records in the last two weeks. The Treasury yield curve, which inverted briefly at the end of August in a well-documented recession signal, has reversed with the generic 2-10 spread closing at 27 points on Tuesday. 

Reuters

October payrolls were another positive economic sign. Companies created 128,000 jobs despite the subtraction of between 40,000 and 70,000 workers due to a strike at GM and layoffs in allied industries during the recording week.  Revisions to the August and September totals added another 95,000.

The continuing performance of the labor market has helped to mitigate concerns that the global economic slowdown would begin to affect hiring by US companies. In turn a weaker job market would bring down consumer spending. The 2.0% expansion in the second quarter was fueled largely by consumption. Business investment having been sidelined by the US China trade war.

In the September Fed Projection Materials the governors predicted 2.2% GDP this year, it is currently 2.33% through three quarters, and 2.0% next year.  The Fed funds target range of 1.5%-1.75% is below the 1.9% year end estimate.  The next set of projections will be issued with the December 11th rate announcement at the final meeting of the year.

Representatives and Senators are sure to bring up one topic that will test Chairman Powell’s diplomacy—the overt criticism of Fed’s policy from President Trump.

In a speech to the Economic Club of New York on Tuesday the President repeatedly attacked the central bank for keeping credit too tight.

“We are actively competing with nations who openly cut interest rates so that now many are actually getting paid when they pay off their loan, known as negative interest,” said the President. “It puts us at a competitive disadvantage.”

In the past when President Trump had criticized the Fed Chairman Powell had barely demurred, saying that the governors had the interests of the American people and the bank's mandates in mind and that politics did not and will not enter into policy considerations.  

No doubt Mr. Powell’s restraint will be tested numerous times as the legislators attempt to elicit criticism of the President’s remarks.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD hits fresh two-month highs amid dollar weakness

EUR/USD has hit new two-month highs above 1.1940 as the dollar resumes its decline. Optimism about the US transition and covid vaccines is weighing on the safe-haven dollar. 

EUR/USD News

GBP/USD falls toward 1.33 amid Brexit acrimony

GBP/USD is falling toward 1.33 as both the EU and the UK are busy blaming each other for an impasse in Brexit talks. The thorny issues remain fisheries, governance and setting a level playing field.

GBP/USD News

XAU/USD attempting to bounce up from $1,775 low

Gold futures accelerated heir downtrend from last week highs near $1,900, breaking below the 200-day SMA, at $1,800 area, to hit its lowest prices in nearly five months, at $1,775.

Gold news

Dollar offered ahead of the weekend

Equities are finishing the week on a firm tone, while the US dollar remains heavy. In the Asia Pacific, only Australia and India did not end the week on a firm note.

Read more

Black Friday 2020 Discounts!

Learn to trade with the best! Don't miss the most experienced traders and speakers in FXStreet Premium webinars. Also if you are a Premium member you can get real-time FXS Signals and receive daily market analysis with the best forex insights!

More info

Forex Majors

Cryptocurrencies

Signatures