Federal Reserve chair updates congress on state of the US economy
With President Donald Trump on the way to Vietnam for his second summit with North Korea’s leader, US central bank chief Jerome Powell will begin two days of testimony before Congress on the US economy.
A persistent and bruising trade spat with China is currently the single largest geopolitical headwind for the economy, and a significant factor affecting Powell’s monetary policy calculus. On Sunday, President Trump announced that he would delay the imposition of a 25% tariff on $200 billion worth of Chinese goods, citing ‘substantial progress’ in trade talks that could lead to a summit with Xi Jinping if ‘additional progress’ was made. This sent US stock index futures soaring.
December’s weak manufacturing and consumer data have many economists suggesting that economic growth slowed in the last three months of 2018 (preliminary figures are due on Thursday), reflecting the impacts of the trade dispute. Meanwhile, analysts are forecasting a significant slowdown in the first quarter of 2019.
Mr Powell will reflect these realities today, although won’t sound any alarm bells. Instead, he’s expected to suggest that slower growth and reduced inflationary pressures mean few rate rises are likely in the coming year.
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