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WASHINGTON — Jerome Powell, the Federal Reserve chair, painted an optimistic picture of the U.S. economy before Congress on Wednesday, though he warned threats to the outlook persist.
“In particular, sluggish growth abroad and trade developments have weighed on the economy and pose ongoing risks,” Powell said during his prepared remarks.
The United States’ central bank has cut interest rates three times since late July, as tensions from President Donald Trump’s trade war and slowing growth abroad unnerved companies and weighed on investment. Lower borrowing costs have helped to cheapen mortgage costs and could keep consumers spending.
But as investors increasingly expect trade tensions to ease and as the effects of the recent rate cuts play out, the Fed has indicated it may shift to a wait-and-see mode as it tries to gauge whether further action is necessary. Powell upheld that message before lawmakers.
Powell, who spoke before Congress’ Joint Economic Committee, indicated that the Fed is keeping an open mind about the possibility that the job market — which is performing well, with unemployment near its lowest level in 50 years — can continue chugging along as wage growth remains moderate and inflation muted.
Powell also used the appearance to emphasize the central bank’s freedom from the political process.
The Fed’s independence been under strain over the past year, with Trump regularly attacking the Fed for not lowering borrowing costs quickly enough and blaming the central bank for any economic weakness. On Tuesday, Trump once again criticized the Fed during a speech before the Economic Club of New York, accusing it of putting the United States at a competitive disadvantage to other nations.
“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,” Trump said, adding “I want some of that money.”
Powell said during his testimony that negative rates “would certainly not be appropriate in the current environment” because the U.S. economy “is in a strong position.”
While Trump has pointed at the Fed for any lackluster economic or stock market performance, Powell suggested a different culprit — the president’s own trade war.