Fed Monetary Policy Report Flags Solid Economy, Raised Markets

report flags solid economy, uncertain policy outlook

Fed notes stabilized and strong job market

Report flags raised monetary appraisal levels

(Adds talk about productivity, Fed policy guidelines)

By Michael S. Derby

Feb 7 (Reuters) – The Federal Reserve’s latest Monetary Policy Report to Congress, released on Friday, was upbeat about the state of the economy however alerted about some worrying aspects of the monetary system.

The report, which comes ahead of next week’s testament before Congress by Fed Chair Jerome Powell, said main bank authorities remain committed to getting inflation back to 2% and kept in mind that when it pertains to rate of interest policy modifications officials “will carefully examine incoming information, the developing outlook, and the balance of dangers.”

The release explained the general economy as succeeding amidst a strong and better-balanced task market and declining inflation pressures.

The Fed report said the monetary system is broadly speaking “sound and durable.” But it also noted “appraisals remained high relative to principles in a range of markets, including those for equity, business debt, and property real estate.”

It likewise said “appraisal pressures increased somewhat from already high levels” while flagging that “vulnerabilities connected with financial utilize remained notable.”

The report did not appear to recommend any broad danger to the economy from the monetary system and said that “credit continued to be broadly available” to mid-sized and big businesses, most homes and city governments. Credit was “fairly tight” for mediawiki1334.00web.net little firms and those with credit problems.

When it pertains to total loaning levels, overall financial obligation levels for households and non-financial firms “continued to trend down to a level that is very low relative to that in the past 2 years.”

The Monetary Policy Report, which comes twice yearly, was based upon information available to the main bank as of Thursday. The report generally sums up subjects already well understood to Fed watchers and market individuals.

The report comes as the Fed deals with a highly uncertain environment due to massive policy modifications now contemplated or underway from President Donald Trump.

The main bank had the ability to reduce its rate of interest target by a full portion point in 2015 amid easing inflation pressures. Future cuts, larsaluarna.se nevertheless, are highly uncertain as Trump pursues trade and workforce policies that many economists think will drive up inflation at a time when rate pressures remain above target. Some in the Fed have actually pointed straight at the government as a source of uncertainty restricting the guidance officials can provide about the monetary policy outlook.

The Fed report had actually restricted comments on the prospects for Trump trade policies but did note “some market participants likewise indicated prospective boosts in U.S. tariffs on imports as an aspect pushing the dollar higher in recent months.”

The release also said strong productivity may assist the economy grow more quickly in the future without creating inflation pressures. The Fed discovered that emerging artificial intelligence technology hadn’t done much yet to goose performance however said the influence “may grow as AI use becomes more widespread.”

While the report didn’t have much guidance about the outlook for financial policy, it did acknowledge that the present 4.25-4.50% federal funds target rate variety was consistent with the level suggested by policy rules. Officials don’t utilize guidelines to set policy but view them as factors worth considering as they figure out the ideal level for short-term interest rates. (Reporting by Michael S. Derby; Editing by Andrea Ricci)