Fed chairman: economy strong, job growth continues, inflation tame

The US economy is strong, the job market continues to expand as wages rise and inflation remains low, but the coronavirus (COVID-19) in China poses a potential threat to continued prosperity worldwide, Federal Reserve Chairman Jerome Powell told members of Congress on Tuesday.

The US economy, now in its 11th year of expansion, the longest on record, got a boost last year amid a worldwide economic slowdown when the Federal Open Market Committee (FOMC) cut interest rates three times by a quarter-point each in 2019.

Powell called the current target range for short-term borrowing rates of 1.50 to 1.75 percent the "appropriate" level to maintain steady economic growth.

"Policy is not on a preset course," Powell testified before the House Financial Services Committee. "If developments emerge that cause a material reassessment of our outlook, we would respond accordingly."

Powell said the economy averaged 200,000 new jobs per month in the second half of 2019 and added another 225,000 in January, lowering the unemployment rate to 3.6 percent and close to a 50-year low.

"Job openings remain plentiful," he said. "People who live and work in low- and middle-income communities are finding new opportunities. Employment gains have been broad-based across all racial and ethnic groups and levels of education."

Powell said the nation's gross domestic product — the value of all goods and services produced in a year — continued to rise and is supported by strong consumer spending.

Domestic residential investment strengthened in the second half of 2019, but business investment and exports were weak, reflecting slowing economic conditions abroad.

"In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy," he said.

Powell said the labor force participation rate — the number of people aged 16 to 64 currently employed or seeking employment — is at its highest rate in decades, but there are "troubling disparities across racial and ethnic groups" and in certain regions of the country.

He said productivity growth, the "main engine" for raising wages and living standards, is increasing but overall has been "subpar" throughout the 11-year economic expansion.

"Finding ways to boost labor-force participation and productivity growth would benefit Americans and should remain a national priority," Powell said.

He said inflation was 1.6 percent in 2019, just below the Fed's target of 2 percent.

"The FOMC believes that the current stance of monetary policy will support continued economic growth, a strong labor market and inflation returning to the committee's 2 percent objective," Powell said.