Federal Reserve Chairman Jerome Powell said Tuesday that the U.S. economy is in a “very good place,” and shrugged off concerns over a recession and the impact of the coronavirus.
In testimony to the House Financial Services Committee, Powell said he does not believe markets are at risk of talking themselves into a recession.
“I don't think so and I certainly hope not,” Powell said. “There’s no reason why the expansion can’t continue. There’s nothing about this expansion that is unstable or unsustainable."
Powell said the U.S. economy is in a “very good place,” pointing to job creation and moderate growth in a sluggish global growth environment. Despite weak manufacturing numbers, Powell said trade-related uncertainties have “diminished.”
But Powell said he is still “carefully” watching the risks of the coronavirus outbreak to the U.S. economy, adding that the negative impacts on the Chinese economy will “very likely” have some spillover effects on the U.S. economy.
But Powell said it is too early to say if the impact will be material enough to force the Fed’s hand in changing policy.
“We have to resist the temptation to speculate on this,” Powell told Congress in testimony.
President Donald Trump turned again to Twitter to bash Powell mid-testimony, blaming the Fed for the Dow Jones Industrial Average slipping off of its intra-day highs. He reiterated his call for negative interest rates, an idea that Powell has pushed back against.
When Jerome Powell started his testimony today, the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual, and is now at -15. Germany & other countries get paid to borrow money. We are more prime, but Fed Rate is too high, Dollar tough on exports.
— Donald J. Trump (@realDonaldTrump) February 11, 2020
“I really can’t, I’m not following the market as I sit here answering your questions,” Powell said when asked to comment on the tweet.
Coronavirus risk not yet “material”
The Fed appears poised to hold rates steady at the current range between 1.5% to 1.75%, insisting that only a “material” change in the outlook would push the Fed to make a move on rates.
Powell said the coronavirus-related impacts on the U.S. economy would have to be “persistent” for the Fed to deem it a material change.
Powell on Coronavirus: There is "likely to be some effect" on U.S. economy but says there would have to be "persistent and material" effects for Fed to react pic.twitter.com/w6yQUk3blo
— Brian Cheung (@bcheungz) February 11, 2020
But for the time being, Powell said the biggest effects of the outbreak would be on China, at least through some part of the first half of the year. He also flagged China’s geographic neighbors and its major trading partners in Europe as those more heavily exposed to the coronavirus risks.
Powell’s remarks echo those of other Fed officials, who have said this week that they are monitoring the situation but hope that coronavirus will generate only “transitory” effects in the short-term.
Powell said he has confidence in the Chinese response to the outbreak.
“The People's Bank of China has done a number of things to support economic activity and I think you can expect the Chinese government to do a lot of things to support economic activity,” Powell said.
Climate change and parties
Powell also fielded a number of questions on topics ranging from climate change to his appearance at a party at Amazon CEO Jeff Bezos’s house.
Powell was asked if the Fed was interested in joining the Network for Greening the Financial System, a global cohort of central banks and regulators focused on the financial risks of climate change. The Fed is not currently a member.
“We haven’t made a decision about that,” Powell said, adding that if the Fed would not be “signing up for everything that everybody there believes.’
In contrast, the European Central Bank is an official member of the NGFS, and ECB President Christine Lagarde has made it a priority for her central bank’s internal framework review.
In a separate line of questioning, Rep. Katie Porter, a Democrat from California, pressed Powell on his appearance at a party that Amazon CEO Jeff Bezos threw at his DC mansion in late January. Porter asked if Powell met with Bezos, JPMorgan Chase CEO Jamie Dimon, or Jared and Ivanka Trump and asked if any possible interactions would create “external pressures” on Fed decisions.
“I didn’t talk to any of the people you named,” Powell said, adding that he was escorting his son and his son’s wife at the party.
Powell’s testimony is the first of back-to-back days of appearances on Capitol Hill. On Wednesday, Powell is set to testify to the Senate Banking Committee at 10 a.m. ET.
Correction: An earlier version of this story incorrectly identified Katie Porter as Katie Hill. The error has been corrected.
Brian Cheung is a reporter covering the banking industry and the intersection of finance and policy for Yahoo Finance. You can follow him on Twitter @bcheungz.
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