Federal Reserve Chairman Jerome Powell said on Thursday the USA central bank has the ability to be patient on policy given inflation is stable, allowing it to assess whether the United States economy will slow this year as some in financial markets worry.
James Bullard, president of the St Louis Federal Reserve Bank, one of 12 in the Fed system and a voting member of the policy committee this year, called the current interest rate "a good level", in an interview with the Wall Street Journal.
"We're in a place where we can be patient and flexible and wait and see what does evolve, and I think for the meantime we're waiting and watching", Powell said in a question-and-answer session Thursday at the Economic Club of Washington, D.C.
That prospect has cheered markets, which had grown anxious that the Fed was not taking into account a variety of headwinds that could slow US growth this year.
Clarida repeated Powell's assertion earlier in the day that monetary policy was not on a preset course.
US stocks initially turned lower after Powell said the central bank is sticking with its process of shrinking its balance sheet to a more normal level, which removes stimulus put into place to revive the economy following the financial crisis and recession a decade ago.
"There is no such plan", Powell said.
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Speaking to an audience in Washington, Powell delivered the same reassuring message of restraint and flexibility that bolstered markets last Friday.
His comments and remarks this week by other Fed officials have all suggested the central bank is prepared to pause its string of rate hikes at the beginning of this year to assess the impact of the Fed's credit tightening.
JPMorgan Chase has estimated that the partial government shutdown - which is 20 days old Thursday - is shaving $US1.5 billion off the economy each week, a modest amount in the context of a $US20 trillion economy, the damage will keep growing.
At the same time, Powell acknowledged that financial markets are expressing concern about risks. "The principal worry is global growth", he said.
While he has near weekly meetings with Treasury Secretary Steven Mnuchin, Powell said he has not met with Trump since taking over as Fed chairman, nor does he have any meetings with the president scheduled.
Powell and others have been less demonstrative and noted that economic data remains strong, particularly after a recent payroll report that showed more than 300,000 jobs added in December.
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.