Powell comments on job creation status in US economy

Fed Chair Jerome Powell is speaking Tuesday before the Senate Banking Committee as part of his semiannual address to Congress on monetary policy.

With the Fed still on hold regarding interest rates, Powell’s remarks are closely monitored for hints about what it will take to start easing. At the Fed’s June meeting, policymakers expressed misgivings about the progress on inflation, saying they still need to see more evidence that it’s heading back to the 2% target.

In his most recent remarks, Powell said he and his colleagues “want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”

Powell will continue his testimony Wednesday before the House Financial Services Committee. The appearance is mandated by the Humphrey-Hawkins Act of 1978.

Higher rates of immigration don’t appear to be either making inflation faster or slower in aggregate, Federal Reserve Chair Jerome Powell said on Tuesday.

“My sense is that in the long run, [immigration is] neutral on inflation,” Powell said. “In the short run, it may actually have helped because the labor market got looser because there were more people.”

The commercial real estate sector will remain stressed for some time, Federal Reserve Chair Jerome Powell said on Tuesday, but U.S. banks are well positioned to manage the risks.

“It is a risk that has been with us and will be with us for some time, probably for years,” Powell said. “And banks need to be honestly assessing what their risk is. They need to be assured that they have the capital and liquidity and the systems in place to manage this risk.”

The U.S. economy has performed better than its developed-market peers, at least partly because it has a more flexible labor market and an effective banking system, Federal Reserve Chair Jerome Powell said.

“Europe has seen productivity increases of about 1% a year for 40 years, we’ve seen 2%,” Powell said. After compounding, “the difference is just enormous after 40 years in terms of incomes and living standards.”

Chair Jerome Powell said the Federal Reserve is aware of the risk of a rebound in price growth and emphasized the central bank’s commitment to its 2% annual inflation target.

Federal Reserve Chair Jerome Powell emphasized the importance of central bank policy remaining above the fray of partisan politics during his semiannual testimony before the Senate Banking Committee on Tuesday.

“All advanced economies have adopted a policy of central bank operational independence, and that just means that we make our own decisions,” Powell said. “We’re instructed to make them without taking in extraneous factors, one of which would be politics, and the record is pretty clear that that’s a good, intentional arrangement that serves the public well.”

Key Quotes:

“We are looking at where we can be faster and more forceful where appropriate in supervising banks.”

“Unemployment is still low by historical standards.”

“Job creation is narrowing in the economy.”

“Not sending any signals today about timing of future Fed policy actions.”

“Banks need to be honestly assessing their risk to manage it.”

“Large banks can manage this problem.”

“For smaller banks, we are in touch with those banks to make sure they can manage them.”