IN THIS ISSUE:

1. Powell Repeats: The Fed Can Be “Patient” On Rate Policy

2. No Talk of Slowing the Reduction of Fed’s Balance Sheet

3. Should President Trump & Congress Reform Federal Reserve?

4. Proposals For Reforming the Federal Reserve

Overview

Fed Chair Jerome Powell used the “patient” word again last week. He also added new words that the Fed can “wait and watch” before raising rates again. And he added another new word, that whenever interest rate increases resume, they will be “gradual.” The stock markets loved it!

There are growing calls for President Trump and Congress to reform the Fed, and there are some good reasons for it. There could be broad bipartisan support if the president decides to pursue it. I’ll discuss this issue as we go along today.

Powell Repeats: The Fed Can Be “Patient” On Rate Policy

For the second time this month, Fed Chairman Jerome Powell reiterated that the central bank now feels it can be “patient” with regard to additional interest rate hikes this year. He first used that word on January 4 while speaking at the American Economic Association conference in Atlanta.

At that time, he said that while the US economy is strong, the global economy is slowing, and this concerns the Fed. He added that US inflation remains quite low. Together, a slowing global economy and very low inflation allow the Fed to reduce the number of rate hikes this year. Markets rejoiced at this apparent reversal of policy and stocks rallied strongly last week.

Then he used the patient reference again last Thursday, speaking at The Economic Club in Washington, DC and added some other language that boosted the stock markets. Powell said the central bank can pause its rate hike policy as the Fed “waits and watches” to see if the US economy will slow down this year or continue the strong recovery that began last year.