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Powell Reiterates Interest Rates Likely To Remain On Hold

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Federal Reserve Chairman Jerome Powell testified before Congress on Wednesday, reiterating that the central bank is likely to leave interest rates on hold in the near future.

Powell told members of the Joint Economic Committee that the Fed would leave rates at their current level unless there is a material change in the economic outlook.

"We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market, and inflation near our symmetric 2 percent objective," Powell said.

"Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly," he added. "Policy is not on a preset course."

Powell noted the Fed's favorable forecast partly reflects the interest rate cuts the central bank made at the last three monetary policy meetings.

However, the Fed chief noted that noteworthy risks to the outlook remain, citing sluggish growth abroad and uncertainty about trade amid the ongoing U.S.-China trade war.

"Moreover, inflation pressures remain muted, and indicators of longer-term inflation expectations are at the lower end of their historical ranges," Powell said. "Persistent below-target inflation could lead to an unwelcome downward slide in longer-term inflation expectations."

He added, "We will continue to monitor these developments and assess their implications for U.S. economic activity and inflation."

Powell's testimony comes a day after President Donald Trump renewed his attacks on the Fed in a speech to the Economic Club of New York on Tuesday, accusing the central bank of putting the U.S. at a "competitive disadvantage to other countries."

Trump claimed the U.S. economy and the stock markets would be even stronger if the central bank would take his advice and slash interest rates further.

"But we all make mistakes, don't we?" Trump said in an apparent reference to his decision to nominate Powell as Fed Chairman.

The Fed is scheduled to hold its next monetary policy meeting December 10-11, with CME Group's FedWatch Tool currently indicating a 96.3 percent chance the central bank will leave rates unchanged.

"On balance, there is still a small chance of one final 25bp cut over the coming months if, as we expect, economic growth slows further," said Andrew Hunter, Senior U.S. Economist at Capital Economics. "But it now looks increasingly likely that the Fed will move to the side-lines for an extended period."

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