Fed's Powell heads to Congress with good data in hand but rising uncertainty
By Howard Schneider
WASHINGTON (Reuters) - Federal Reserve Chair Jerome Powell begins two days of hearings on Capitol Hill on Tuesday with the economy around full employment, inflation expected to ease, and intense uncertainty about how all that will hold up under Trump administration trade and other policies that are still unfolding.
Since Powell last appeared before Congress for one of his two regular rounds of testimony, Donald Trump's election has raised the possibility of successive rounds of tariffs, lower immigration and fewer available workers in the economy, and potentially extensive changes in financial sector oversight.
Powell and other Fed officials are always careful to sidestep judgment about the wisdom of executive branch or congressional actions, keeping their focus on how the economy changes as a result.
But given where the economy stands and the extent of what Trump seems to intend, the premium at the Fed for now is to go slow and hope nothing breaks.
"What we have now is a good labor market. We have the economy growing at 2 to 2.5%. Inflation has come down," Powell said at a press conference following the Fed's January meeting.
But "there's probably some elevated uncertainty" given changes to trade, immigration, fiscal and regulatory policy, Powell said, with Fed officials poised to delay further interest rate cuts until it is clear how the economy adapts in coming months.
"We do not need to be in a hurry to adjust our policy stance," Powell said.
Powell will carry that message to the Senate Banking Committee in a hearing that begins at 10 a.m. EST (1500 GMT) and then to the House Financial Services Committee at 10 a.m. on Wednesday.
Both panels are now under Republican control with new chairs. While Powell has made it a priority in his nearly seven years as Fed chair to develop close ties on Capitol Hill, there will be plenty for Senators and Representatives of both parties to question him about.
Inflation has fallen and is expected to continue doing so; but some recent consumer surveys have shown the public potentially becoming skeptical, a particular problem for the Fed if that continues.
The possibility of steep tariffs on close trading partners like Mexico and Canada and on core industrial products like steel and aluminum has triggered debate over the ways in which such import taxes would or wouldn't cause generalized inflation.
The administration hasn't rolled out a detailed tax, spending and deregulation plan yet, but coming negotiations over those issues could have a large influence on the economy's performance.
