Fed Monetary Policy Report Flags Solid Economy Raised Markets

Fed policy report flags strong economy, uncertain policy outlook


Fed notes stabilized and strong job market


Report flags raised monetary appraisal levels


(Adds talk about efficiency, Fed policy rules)


By Michael S. Derby


Feb 7 (Reuters) - The Federal Reserve's most current Monetary Policy Report to Congress, released on Friday, was positive about the state of the economy however warned about some concerning aspects of the monetary system.


The report, which comes ahead of next week's statement 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 rates of interest policy changes authorities "will thoroughly assess inbound information, the developing outlook, and the balance of threats."


The release explained the overall economy as doing well amidst a strong and better-balanced job market and declining inflation pressures.


The Fed report said the monetary system is broadly speaking "sound and durable." But it likewise noted "appraisals remained high relative to principles in a variety of markets, including those for equity, corporate debt, and domestic genuine estate."


It likewise said "appraisal pressures increased rather from already high levels" while flagging that "vulnerabilities associated with monetary take advantage of remained noteworthy."


The report did not appear to suggest any broad hazard to the economy from the financial system and said that "credit continued to be broadly available" to mid-sized and large businesses, the majority of homes and local federal governments. Credit was "fairly tight" for small companies and those with credit concerns.


When it pertains to total borrowing levels, total financial obligation levels for families and non-financial companies "continued to trend down to a level that is very low relative to that in the past 20 years."


The Monetary Policy Report, which comes two times yearly, was based on data available to the main bank since Thursday. The report normally sums up topics currently well understood to Fed watchers and market individuals.


The report comes as the Fed faces a highly uncertain environment due to large-scale policy modifications now pondered or underway from President Donald Trump.


The main bank had the ability to decrease its rates of interest target by a complete percentage point last year amidst easing inflation pressures. Future cuts, gratisafhalen.be however, are extremely uncertain as Trump pursues trade and labor force policies that a lot of economic experts believe will drive up inflation at a time when price pressures remain above target. Some in the Fed have pointed straight at the federal government as a source of uncertainty restricting the guidance officials can offer about the financial policy outlook.


The Fed report had actually limited remarks on the potential customers for Trump trade policies however did keep in mind "some market participants also indicated possible increases in U.S. tariffs on imports as an aspect pressing the dollar higher in recent months."


The likewise said strong efficiency may help the economy grow faster in the future without creating inflation pressures. The Fed discovered that emerging expert system technology hadn't done much yet to goose performance but said the impact "may grow as AI utilize becomes more prevalent."


While the report didn't have much guidance about the outlook for monetary policy, it did acknowledge that the current 4.25-4.50% federal funds target rate variety followed the level suggested by policy guidelines. Officials do not use rules to set policy but see them as elements worth thinking about as they figure out the right level for short-term interest rates. (Reporting by Michael S. Derby; Editing by Andrea Ricci)