11/28/2018 12:30:00 PM Powell: US economy and banks sturdy
WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell says he’s pleased with the state of the U.S. economy but cautions that some forms of corporate debt have reached risky levels. At the same time, Powell says the financial system and markets appear far sturdier than they did before the 2008 crisis.
Powell said in a speech today to the Economic Club of New York that the Fed is monitoring potential vulnerabilities in the banking system to ensure its continued stability.
“We see no major asset class,” Powell said, “where valuations appear far in excess of standard benchmarks.”
Powell stressed that future interest rate hikes aren’t on a “preset policy path,” which may suggest that the Fed would consider a pause in its rate hikes next year to assess the impact of its credit tightening.
Some of Powell’s previous observations and similar remarks from other Fed officials have raised hopes in financial markets that the central bank may be close to slowing its rate increases, which have gradually raised borrowing costs for consumers and businesses. Any such slowdown — or pause — in its rate hikes would be welcome news for a stock market that has been battered by fears that the Fed’s continued credit tightening could end the long bull market.
In an appearance earlier this month, Powell cited strong annual economic growth above 3 percent and unemployment at a near five-decade low of 3.7 percent. Those trends, he said, were coinciding with inflation remaining “right on target” at the Fed’s goal of 2 percent annual price increases.
After keeping rates at a record low near zero for seven years, the Fed three years ago began gradually raising rates, including three hikes this year. Those increases have raised its benchmark rate to a still-historically-low range of 2 percent to 2.25 percent.
In its most recent projections, the Fed forecast that it would raise rates in December for the fourth time this year, followed by three more hikes in 2019.
Some economists say three rate increases for next year are beginning to look less certain.