November 18, 2019 — Fed Chair Powell Addressed Congress


Jerome Powell spoke before the House Budget Committee last week.  The tone of the speech was fairly optimistic.  Powell does not see signs of immediate danger in light of the trillion dollar deficit amassed by the government. He thinks the current economic phase is sustainable, and there are not signs of any bubbles.

Powell said the nature of expansions now is to last longer than they have in the past.  “We are the strongest country, we have the best institutions, we have the best labor force,” he said. “We have such strengths, and I think possibly the day of reckoning could be quite far off.”

 “We think that really is because we are no longer facing high and volatile inflation,” he said. “What we’ve seen is three of the four longest business cycles in U.S. recorded history have been quite recent.”

He is concerned about several dangers such as a manufacturing slowdown and trade issues, and he again called the path of government debt unsustainable. The national debt is expanding at a faster pace than economic growth.

Powell made it clear, unless there is a “material reassessment of the outlook” the FOMC does not see the need for further monetary accommodation. A collapse in trade talks could be such an event, but the government seems to be working toward some sort of resolution.