Business

Fed chair likely to give Congress positive outlook

Federal Reserve chair Jerome Powell is likely to sound fairly upbeat about the outlook for US economic growth when he testifies this week in the first of his twice-a-year updates to Congress, even as he nods to the potential threat from the coronavirus in China.

That assessment would echo the formal report the Fed submitted to the US Congress on Friday. It repeated the central bank's view that its current target range for short-term borrowing costs, between 1.5 per cent and 1.75 per cent, is "appropriate" to keep the expansion on track.

With risks like trade policy uncertainty receding, Mr Powell has signalled he sees no reason to adjust US interest rates unless there is a "material" change to the current outlook.

That is a view he is likely to reiterate when he presents the Fed's monetary policy report to the House Financial Services Committee and the Senate Banking Committee.

"His message will probably be that, if rate cuts are coming, they would come solely in response to global disruptions associated with the virus," said Mr Roberto Perli, an economist at Cornerstone Macro.

"He will likely say clearly that the US economy is inherently healthy."

Investors will be watching carefully for any new details on the Fed's plans for its balance sheet and for the short-term funding markets into which it has been pumping liquidity to prevent a repeat of an unexpected spike in the policy rate last fall.

A letter that some Democratic US senators sent last week to Mr Powell about the steps the Fed is taking suggests he could be in for some pointed questions on the subject. - REUTERS

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