WASHINGTON (AP) — The Latest on Federal Reserve Chairman Jerome Powell’s testimony to Congress (all times local):
Federal Reserve Chairman Jerome Powell wraps up more than two hours of Senate testimony by giving a broader definition of what the Fed means when it says it will be “patient” in deciding when to change interest rates this year.
“When I say that we are going to be patient what that really means is that we are in no rush to make a judgment about changes in policy,” Powell tells the Senate Banking Committee. “We are going to be patient. We are going to allow the situation to evolve … and allow the data to come in. And I think we are in a very good place to do that.”
Powell covered a range of topics in his appearance Tuesday before the Senate Banking Committee. He will testify before the House Financial Services Committee on Wednesday.
Federal Reserve Chairman Jerome Powell welcomes a solid increase in the past year in the proportion of Americans working or looking for work, but notes that the so-called labor force participation rate remains lower in the United States than most other wealthy nations.
“This is very, very important to us,” he says in testimony to the Senate Banking Committee. “We hope it’s sustained.”
Powell also says that the gain impacts Fed policy, which suggests that he sees the extra workers as allowing companies to hire more without paying so much in extra wages that it would spark inflation.
When asked why U.S. labor force participation trails that of other countries, Powell blames a lack of skills and need for workers to gain more education. He also says some workers risk losing more in government benefits than they gain in pay if they take jobs.
Massachusetts Sen. Elizabeth Warren, who is running for the Democratic presidential nomination, called out “child care,” a reference to economic research that suggests many women have dropped out of the workforce because of the high cost of child care. Warren has proposed legislation that would provide free, universal child care.
Powell says the Congress should raise the debt limit to avoid any chance of default by the U.S. government.
“The idea that the United States would not honor its obligations and pay them when due is not something we can consider,” he says during testimony Tuesday before the Senate Banking Committee.
Congress faces a March 2 deadline to raise the legal limit on the amount of debt that can be issued by the U.S. government. Without doing so, the federal government would be unable to continue borrowing and wouldn’t be able to pay its bills, from government benefits to military costs. That could cause interest rates to spike.
The Treasury Department can take a range of accounting measures to postpone the deadline, perhaps for months, which would give Congress more time to raise the limit.
Sen. Jon Tester, D-Mont., tells Federal Reserve Chairman Jerome Powell that farmers in his state were being seriously harmed by the Trump administration’s trade battles, which have resulted in retaliatory tariffs being imposed on U.S. farm products such as soybeans.
Asked to quantify the impact of the trade battles on farmers, Powell says the Fed has been hearing from various businesses about the impact of the higher tariffs but that it was difficult to break out the impact that the trade fights were having on farmers versus other issues.
“The agriculture economy has been under a lot of pressure for five years now,” Powell says, noting that crop prices have been low for some time and that has driven up bank foreclosures on farms. “Obviously, the trade issue has not helped this year.”
Powell did not want to go anywhere near critical comments his predecessor Janet Yellen made about President Donald Trump.
Testifying before the Senate Banking Committee, Powell was asked if he agreed with comments Yellen made in a radio interview Monday that she did not believe Trump had a good grasp of economic policy.
Powell replied to Sen. Sherrod Brown, D-Ohio, with a terse, “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.
Federal Reserve Chairman Jerome Powell says the U.S. economy should keep expanding at a solid, though somewhat slower pace this year. But he warns of growing risks, including a global slowdown, volatile financial markets and uncertainty about U.S. trade policy.
In delivering the Fed’s semiannual monetary report to Congress, Powell says the Fed will be “patient” in determining when to boost its benchmark policy rate in light of the various “crosscurrents and conflicting signals.” He says the Fed’s rate decisions will be “data dependent” as the economic outlook evolves.
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.