Live

Watch CBSN Live

Fed chief Jerome Powell says U.S. economy likely to slow

Federal Reserve Chairman Jerome Powell said Tuesday the U.S. economy should keep expanding at a solid, though somewhat slower pace this year. But he warned of growing risks, including a global slowdown, volatile financial markets and uncertainty about U.S. trade policy.

"Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year," Powell said in delivering the Fed's semiannual monetary report to Congress. "Growth has slowed in some major foreign economies, particularly China and Europe. And uncertainty is elevated around several unresolved government policy issues, including Brexit and ongoing trade negotiations."

Despite those concerns, the "job market remains strong" and there are signs of stronger wage growth, he said. The Fed estimates that the economy expanded just short of 3 percent in 2018, compared with 2.5 percent in 2017. The Department of Commerce is scheduled to release quarterly and annual growth figures on Thursday.

Patient on interest rates

Powell said the Fed will be "patient" in determining when to boost its benchmark policy rate in light of the various "crosscurrents and conflicting signals." He said the Fed's rate decisions will be "data dependent" as the economic outlook evolves.

Powell "reiterated the [Federal Open Market Committee's] 'patient' mantra in his semi-annual testimony to Congress today, underlining that the Fed is unlikely to raise interest rates any time soon," said Andrew Hunter, senior U.S. economist with Capital Economics, in a note.

The Fed in December indicated it could hike rates two times this year, after four rate hikes in 2018. But many private economists believe the Fed will keep rates unchanged until late this year and may not hike at all.

Along with citing near-term headwinds for the economy, Powell also pointed to longer term issues that could damp growth. Those include low productivity, "stagnant" income for many families and obstacles lower-income Americans face moving up the economic ladder, he said.

No comment on Trump

Powell declined to respond to a question from Sen. Sherrod Brown regarding President Donald Trump's grasp of economic policy. 

Trump: Federal Reserve thinks "our economy's too good"

Asked by the Ohio Democrat whether he agreed with comments by former Fed Chair Janet Yellen in a radio interview on Monday in which she suggested Mr. Trump doesn't understand the central bank's mission, Powell said, "I don't have any comment on that for you, senator."

Powell came under heavy criticism by Trump last year when the stock market was falling sharply, and the president was blaming the Fed's interest rate hikes for the decline. But earlier this month, Trump invited Powell to what was described as a cordial dinner at the White House.