Federal Reserve Chairman Jerome Powell appeared Tuesday before the House Financial Services Committee, his first testimony since he took charge earlier this month. He moved markets with his upbeat economic assessment, and also dropped some hints about how his views and style might differ from his predecessor, Janet Yellen.
Here are a some observations beneath the main headlines:
A Personal Touch
When a Fed chief testifies before Congress, he or she is generally understood to be speaking for the rate-setting Federal Open Market Committee. Powell, however, on several occasions voiced strong personal views. That perhaps injects a new dynamic into the Fed’s communication that’s different from the Yellen era: a Fed leader whose own inclinations are much better known publicly.
Personalizing was apparent in several of Powell’s responses during the three-hour hearing. Since the Fed last released economic projections, Congress has rolled out two changes that could boost near-term growth. A $1.5 trillion tax package is adding stimulus to the U.S. economy, and a recent budget deal will lift spending caps and increase government outlays.
“I think our view -- my personal view -- would be that there will be a meaningful increment to demand, at least for the next couple of years, from the combination of those two things,” he said.
Powell’s voice also came through in his answer to a question about whether the new stimulus will spur more 2018 rate hikes than the three the Fed signaled in the central bank’s Summary of Economic Projections in December.
“My personal outlook for the economy has strengthened since December,” he said. “I wouldn’t want to prejudge that new set of projections, but we’ll be taking into account everything that has happened since December.”
Why does it matter that Powell isn’t shy about expressing his own views? The chairman is seen as the center of the committee, so his optimism may stoke expectations that the whole group will fall in line and pursue a slightly more aggressive tightening path.
Market Mover