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Fed’s Powell confident in economy but risks persist

Federal Reserve Chairman Jerome Powell speaks during a Senate Banking Committee hearing in Washington on Tuesday.

The U.S. economy is on stable footing, but concerns — including a slowing global economy, particularly in China and Europe, and uncertainty surrounding government policy issues, including Brexit and ongoing trade negotiations — persist, Federal Reserve Chairman Jerome Powell told lawmakers Tuesday in Washington.

The comments came at Mr. Powell's semiannual testimony on the state of monetary policy before the Senate Banking Committee.

Mr. Powell said the job market remains strong and pointed to the 304,000 jobs added in January and the nation's 4% unemployment rate. Moreover, inflation will likely continue to run close to the Fed's 2% target, he added.

"While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals," Mr. Powell said, citing the global economic performance and volatile financial markets.

Mike Crapo, R-Idaho, chairman of the Senate Banking Committee, said he has been pleased with the country's recent economic performance. He touted the January job figures and overall economic growth in 2018 as reasons for his positivity.

"This strong growth, which is on track to continue to exceed previous expectations, will now provide our policymakers with much greater flexibility to address other fiscal challenges than if we were continuing to struggle with insufficient growth," Mr. Crapo said.

After the Federal Open Market Committee's last meeting in January, when it left the federal funds rate unchanged, Mr. Powell said it would be more patient in determining future rate changes. He issued similar sentiments Tuesday. "Going forward, our policy decisions will continue to be data dependent and will take into account new information as economic conditions and the outlook evolve," he said.

Rick Rieder, BlackRock (BLK)'s chief investment officer of global fixed income, said in a statement that he expects rates to remain "relatively stable."

But there are concerns. "The risk to the Fed's policy path is that global growth ends up trending significantly lower, dragging down U.S. growth rates with it, and the Fed is forced to take action before many anticipate," Mr. Rieder said. "That's not our base case, but it remains a risk."