WASHINGTON — Jerome Powell, the Federal Reserve chairman, said on Monday the United States was in a “relatively good place” compared with the bad economic condition he described in 2004, but that the nation still faced a long and slow path to prosperity.
Powell, in his prepared remarks to a Senate banking committee on the eve of the Fed’s midweek policy meeting, said the economy “is continuing to make strides toward sustainable economic growth,” and that he still saw the risks to the economy as roughly balanced.
“We have a long way to go before we get back to what I consider to be a full and productive labor market, and an economy that is broadly based in both its composition and its abilities,” he said.
Powell, who was confirmed as Fed chairman in March, said at the time of his confirmation that he could not see a path back to full employment without generating inflation. However, his latest remarks did not signal a more hawkish stance. He said that the labor market was in good shape and noted that recent job reports have been consistent with his expectation of at least two more interest rate increases from the Fed this year.
Powell said the recent stock market volatility that hit markets in September was somewhat unexpected, and that he understood why investors were nervous. But he expressed confidence that financial markets would continue to function smoothly.
Speaking about the nation’s housing market, Powell said the recent drop in mortgage rates would help support housing construction.
A strong economy is needed to drive the Fed to hike interest rates to keep inflation at bay and to bring down unemployment. Yet Republicans have highlighted recent weakness in the economy as evidence that the Fed should spend less time worrying about inflation and more time supporting economic growth.
Powell on Monday did not directly address the political focus on his job.
“Clearly our political environment is difficult, but I am focused on the work of the Federal Reserve,” he said.
He also did not comment on the ongoing trade dispute between the United States and China. The dispute has been one of the key drivers of the market volatility that helped cause a drop in inflation in September, a number of Fed policymakers have said.
Powell reiterated his comments from several weeks ago, when he said the Fed’s approach to monetary policy was “data dependent.”
He said a range of indicators including U.S. consumer price inflation, employment and unemployment, consumer sentiment, foreign economic conditions and financial market conditions would all be key factors in the Fed’s decision on its next interest rate hike.
“We are monitoring these indicators to assess how to appropriately position our monetary policy over the longer run,” he said.
Powell said a full employment is the state of the economy where labor productivity is highest, gross domestic product is expanding at a vigorous pace and near full employment “remains a respectable objective in our view.” The Fed, he added, “recognizes that it’s possible that we have a longer way to go before we reach our preferred level of unemployment.”
The Fed has said it plans to gradually raise interest rates over the next several years. The current unemployment rate is 3.7 percent. The Fed has said it plans to gradually raise rates over the next several years. The current unemployment rate is 3.7 percent.
Powell’s remarks were published after he met at the White House with President Donald Trump, who has called off hopes of timing a fourth round of spending cuts that the president’s Republican Party had been arguing for in order to lower the federal budget deficit.
Trump said he was “very satisfied” with Powell’s meeting with the Fed chairman on Monday, and said there was no discussion of monetary policy.