Developments in oil markets “closely” monitored – Federal Reserve chief

WASHINGTON, Federal Reserve Chief Jerome Powell affirmed Tuesday that as monetary policymakers, they “closely monitor” developments in oil markets because “disruptions in these markets have played a role in several US recessions.” In a speech at the 61st Annual Meeting of the National Association for Business Economics, in Denver, Colorado, Jerome said “traditionally, we assessed that a sharp rise in the price of oil would have a strong negative effect on consumers and businesses and, hence, on the US economy.” “Today a higher oil price would still cause dislocations and hardship for many, but with exports and imports nearly balanced, the higher price paid by consumers is roughly offset by higher earnings of workers and firms in the US oil industry,” he added.

He continued that “moreover, because it is now easier to ramp up oil production, a sustained price rise can quickly boost output, providing a shock absorber in the face of supply disruptions.” He stressed that “setting aside the effects of geopolitical uncertainty that may accompany higher oil prices, we now judge that a price spike would likely have nearly offsetting effects on US gross domestic product (GDP).” As for the US economy, Powell said that “at present, the jobs and inflation pictures are favorable,” with many indicators showing “a historically strong labor market, with solid job gains, the unemployment rate at half-century lows.” “But there are risks to this favorable outlook, principally from global developments,” he warned.

He indicated that “growth around much of the world has weakened over the past year and a half, and uncertainties around trade, Brexit, and other issues pose risks to the outlook.” He noted “we believe that our policy actions are providing support for the outlook. Looking ahead, policy is not on a preset course.” He added that in the upcoming Federal Open Market Committee (FOMC) meeting, “we will be carefully monitoring incoming information. We will be data dependent, assessing the outlook and risks to the outlook on a meeting-by-meeting basis.” “Taking all that into account, we will act as appropriate to support continued growth, a strong job market, and inflation moving back to our symmetric two percent objective,” he affirmed.

The Federal Reserve cut interest rates twice this year amid sharp criticism from President Donald Trump demanding a much larger cut. The Federal Reserve is expected to cut interest rate once again later this month.

Source: Kuwait News Agency