While #Fed Chair Powell’s testimony before #Congress didn’t produce any significant policy “news” that wasn’t already known, he was quite upbeat in his assessment of the U.S. #economy, even after being pressed on the possible impact of #coronavirus.
The Chair noted the recent strength of labor #markets and described the rate of #inflation as “low and stable,” acknowledging that it continued to run below the #FOMC’s symmetric objective of 2%.
We’ll be closely watching the #Fed’s language regarding “#financialconditions,” as this factor has become significantly easier in recent months and at some point, the Fed will likely engage with the possibility of reining in some of that #liquidity.
The U.S. #economy has become much less sensitive to minor changes to interest #rate levels over the past few decades, as the economy has increasingly shifted from a goods-producing orientation to one much more focused on services.
That secular transition in the #economy has allowed for a reduced degree of #volatility in employment growth, in inflation and in #economic growth overall, which has tended to dull the cyclical extremes of prior periods, although we still have plenty of risks to consider.
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