Fed Chair Powell Highlights Risks To US Economy On “60 Minutes”

In his “60 Minutes interview” on CBS News last night, Fed chairman Powell had a lot to say on the US economy and Fed policy.

Commenting on inflation and the appropriate policy level, Powell said:

“Inflation is muted and our policy rate, we think, is in an appropriate place… Patient means that we don’t feel any hurry to change our interest rate policy,”

On Inflation

When asked whether the Fed would allow inflation to drift above the 2% target rate, Powell responded by saying:

“That’s something that is worth thinking about, because we want inflation expectations to be anchored at around 2 percent… I think we’ll always be moving inflation back to 2 percent with our policy. But I think we do that in a symmetric way.”

On Rates

The interviewer was keen to press the Fed chairman on when he felt the next likely Fed rate move would be. He also wanted to know what conditions the Fed would need to see to hike or reduce rates.

Responding to this, Powell said: “We’ll be putting that all together and deciding when it will be appropriate to change our policy.”

On The Downturn

Commenting on the recent downturn we’ve seen, Powell said:

“What’s happened in the last 90 or so days is that we’ve seen increasing evidence of the global economy slowing down… We’re going to wait and see how those conditions evolve before we make any changes to our interest-rate policy.”

On Risks

In terms of the Fed’s outlook, Powell noted that “The outlook for the U.S. economy is favorable,”

He added:

“The principal risks to our economy now seem to be coming from slower growth in China and Europe and also risk events such as Brexit.”

On Trump’s Criticism

Many watching the show were keen to see if the issue of Trump’s criticism of the Fed, and Powell specifically, would come up. They did, indeed, address it, though Powell handled the topic with expected diplomacy saying:

“I don’t think it’s appropriate for me to comment on the president…The law is clear that I have a four-year term. And I fully intend to serve it.”

On Leveraged Corporate Lending

Going back to the outlook, another key risk identified by the Fed chair was that of cyber-security. He claimed that the Fed is carefully watching leveraged lending to companies.

On this note, Powell said that “If there were a downturn, having highly leveraged companies would be an amplifier.” He added:

“I don’t think it’s the kind of thing that we saw in the financial crisis.”

In all, while the interview delivered little in the way of new information, it was a nice chance for many to get a more personal view of the new Fed chairman.

Unfortunately for USD bulls, the interview once again confirmed the Fed’s commitment to keeping rates on hold while it monitors various factors.

Technical Perspective

USD is starting the week slightly softer for now. However, while above the 96.82 support level, focus remains on further movement higher within the bullish channel. The next topside level to watch is around the 99.08 mark. There, we have confluence between structural resistance and the channel top.