Fed's Powell again stresses patience as U.S. economy's 'narrative' unfolds

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In the past week, Chairman Jerome Powell and other officials have stressed that the central bank will be patient and flexible in responding to economic data, including the potential effects of the trade war.

Powell also said he didn't see signs of a recession in the near term, but noted that his "principal worry" was a slowdown in global growth and that while the United States economy appears "solid", a slowdown in China "is a concern". It would be up to the Fed to decide how to balance those worries with the signals of a strong economy.

With no sign of excessive inflation or outsized risk in financial markets, Powell said the Fed would be "waiting and watching" in coming months.

The FTSE 100 is on track for its best week in three months after global stocks were lifted by reassurances from the US Federal Reserve that it could be patient about interest rate rises.

"We are very focused on our job", Powell said. Trump tapped Powell for the post after deciding not to offer then Fed-Chairman Janet Powell a second term. 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 USA economy.

James Bullard, president of the St Louis Federal Reserve Bank, one of 12 in the Fed system and a voting member of the policy committee this year, called the current interest rate "a good level", in an interview with the Wall Street Journal.

"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 previous year.

The central bank's quarterly forecast in December showed Fed officials still expect two more increases in 2019.

"There is no such plan", Powell said.

The U.S. central bank raised rates four times past year in the face of robust economic growth and unemployment that touched its lowest level in half a century.

Powell noted that the Fed's holdings were around $1 trillion before the 2008 crisis. Markets have expressed concerns that the Fed's operations to reduce the balance sheet could be depressing the markets and ultimately slow growth.

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

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