Public attention this past week was riveted on the impeachment testimony before the House Intelligence Committee, which totally overshadowed Chairman Powell’s semiannual report and two days of testimony to Congress on monetary policy.

That outcome is probably not a bad one since there were no new insights provided nor any clues as to when or specifically why policy might change from what is now widely recognized as a pause. Indeed, Powell’s prepared remarks were virtually the same as those he delivered in his press conference after the FOMC’s October meeting. He made five key points:

1. October – “My colleagues at the Federal Reserve and I are dedicated to serving the American people. We do this by steadfastly pursuing the goals that Congress has given us: maximum employment and stable prices.”

November – “Let me start by saying that my colleagues and I strongly support the goals of maximum employment and price stability that Congress has set for monetary policy.”

2. October – “The US economy is in its 11th year of expansion, and the baseline outlook remains favorable.”

November – “The US economy is now in the 11th year of this expansion, and the baseline outlook remains favorable.”

3. October – “Overall, we continue to see sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2 percent objective as most likely.”

November – “Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2 percent objective as most likely.”

4. October – “Since monetary policy operates with a lag, the full effects of these adjustments on economic growth, the job market, and inflation will be realized over time. 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. We believe monetary policy is in a good place to achieve these outcomes.”

November – “As monetary policy operates with a lag, the full effects of these adjustments on economic growth, the job market, and inflation will be realized over time. 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.”

5. October – “Looking ahead, we’ll be monitoring the effects of our policy actions, along with other information bearing on the outlook, as we assess the appropriate path of the target range for the fed funds rate. Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. Policy is not on a preset course.”

November – “We will be monitoring the effects of our policy actions, along with other information bearing on the outlook, as we assess the appropriate path of the target range for the federal funds rate. Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. Policy is not on a preset course.”

One notable change from language used in earlier press conferences was related to his discussion of what could cause the FOMC to cut rates further. In previous press conferences, Powell used the term uncertainty to describe how slow growth abroad and trade issues were affecting the economy. As we have noted previously, to economists the term uncertainty applies when they cannot assess the probability that certain events will occur, and thus Powell is saying that it is not clear whether or how cuts in a policy rate might offset possible negative outcomes. However, in his September presentation to Congress, Chairman Powell used the term risk to note that “… sluggish growth abroad and trade developments have weighed on the economy and pose ongoing risks.” This language suggests that there is a subtle but significant change in how the Committee might be now viewing those two factors, and the previous policy moves may now be viewed as risk insurance again possible negative impacts that trade and the global slowdown may have on the economy.

In contrast to many previous monetary policy hearings, the questions from participants were more to the point, and the Congresswomen and -men appeared to be playing less to the TV audience and focusing more on substantive issues. Some asked about the impact of global warming on the economy, while others inquired how policy might help particular parts of the country that are not doing as well as others and what if anything can be done about taxes and their role in promoting income inequality. In each instance Powell respectfully noted the importance of the concerns and said that the Fed was researching many of those issues, but they were really the province of fiscal policy and the Congress and not the responsibility of the Federal Reserve. Overall, the hearings were both thoughtful and respectful, and they stood in sharp contrast to the ongoing impeachment hearings that shoved Powell’s presentation into the shadows.

1. https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20191030.pdf

2. https://www.federalreserve.gov/newsevents/testimony/powell20191113a.htm