Continue Reading Below
In testimony he provided to the Joint Economic Committee of Congress, Powell reiterated what he said during the Fed's two-day meeting in October: The current level on its benchmark interest rate will likely remain "appropriate," despite persistent risks to the economic outlook. Those risks, he said, include slow global growth and the U.S.-China trade war.
"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," he said in his Wednesday remarks.
Powell is scheduled to appear before Congress twice this week and face a wide range of questions about the state of the U.S. economy. He sounded an upbeat note in his opening remarks, attributing some of the economy's strength to the three quarter-percentage interest rate cuts that officials made this year.
“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,” he said. “This favorable baseline partly reflects the policy adjustments that we have made to provide support for the economy.”
However, Powell warned that as a result of the so-called "mid-cycle adjustment," interest rates are historically low, giving the Fed few tools in its arsenal to respond to an economic downturn, should one happen. Still, he said that lower interest rates -- and lower growth -- are part of the "new normal."
"You're seeing that all over the world, not just the United States," he said during a question-and-answer. "You're seeing it to a much greater extent in many parts of the world, and we're seeing it here."
At the end of October, the Fed cut rates by a quarter-percentage point for the third time this year to cushion the economy against the U.S.-China trade dispute and a global growth slowdown, but signaled that it will take a wait-and-see approach before moving rates again. Rates are currently at a range between 1.75 percent and 2 percent.
Because of that, he said that fiscal policy passed by Congress will be important in supporting the economy -- but noted the federal budget is on an "unsustainable path, with high and rising debt."
"Over time," he said, "this outlook could restrain fiscal policymakers' willingness or ability to support economic activity during a downturn."
Powell's testimony is likely to anger President Trump, who frequently berates the Fed for raising interest rates too high, too quickly. On Tuesday, Trump reignited his criticism of Fed officials saying the S&P 500, Dow Jones Industrial Average and Nasdaq Composite would be 25 percent higher if the "Federal Reserve worked with us."
"We are competing against these other countries, nonetheless, and the Federal Reserve doesn't let us play the game," Trump said during a speech at the Economic Club of New York. "It puts us at an economic disadvantage."