U.S. official warns of recession risk if interest rates go much higher

Bullard Warns of a U.S. Recession If Fed Keeps Raising RatesMore

Bullard Warns of a U.S. Recession If Fed Keeps Raising RatesMore

"Especially with inflation low and under control, we have the ability to be patient and watch patiently and carefully as we. figure out which of these two narratives is going to be the story of 2019", Powell said at the Economic Club of Washington.

The head of the Federal Reserve also warned that while his department has no official projection on the current government shutdown, it can still have a damaging effect on the national economy.

Federal Reserve Chairman Jerome Powell on Thursday (Jan 10) stressed again that the USA central bank can be patient in approving any further rate increases as officials gauge whether the US economy will slow this year, as some in financial markets worry, or continue motoring ahead as the Fed itself expects.

"If we find that the ongoing program of balance sheet normalization or any other aspect of normalization no longer promotes the achievement of our dual-mandate goals, we will not hesitate to make changes, " Clarida said.

"I would expect them to repeat that the economy is strong", Scotiabank economist Derek Holt said. He said he didn't know the exact level.

Earlier: Jerome Powell has been moving markets - up and down - lately.

He also said that the Fed had no preset path for rate hikes and would be "patient" when determining whether to hike interest rates further in response to strong USA growth that risks sparking inflation, or to pause rate hikes to account for a global economic slowdown. The Fed's communications - and a Bloomberg News report that President Donald Trump had discussed firing Powell - helping bring on the worst December for stocks since the Great Depression.

He also downplayed December predictions from Fed policymakers showing that, at the median, interest rates would be raised twice this year. Markets have expressed concerns that the Fed's operations to reduce the balance sheet could be depressing the markets and ultimately slow growth. "The principal worry I would have is global growth". Rubenstein also hosts an interview show on Bloomberg Television.

Powell seemed open to, though not enthusiastic, about a potential meeting with Trump. Fed chairs have met with presidents in the past, he added.

Even so, USA central bankers face a challenging year that's complicating their communication.

Fed officials and many forecasters expect growth to slow in 2019, but to remain strong enough to continue generating jobs and keeping the unemployment rate near its nearly 50-year low. Financial markets are incorporating a variety of risks to the outlook, ranging from slowing global growth to the potential for a protracted trade war with China.

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