US Federal Reserve Chairman Jerome Powell has warned of significant damage to the US economy if the current government shutdown continues for some of the US federal government. An „extensive“ decommissioning of the authorities would be reflected in the economic data „fairly clear,“ Powell said yesterday in a speech in Washington.
The budget stalemate has been going on for almost three weeks, triggered by the dispute between US President Donald Trump and the opposition Democrats over the construction of the Wall on the Mexican border.
Trump announced meanwhile that he had canceled his trip to the World Economic Forum in Davos because of the budget dispute in the US – and blamed the Democrats for that. Because of the intransigence of the Democrats on the subject of border security and the great importance of security for the country, he said the trip, wrote Trump on Twitter.
No pressure for further interest rate increase
Despite the boom in the US job market, Powell sees no reason to hurry on the path to higher interest rates. The US Federal Reserve may remain patient in the face of relatively subdued inflation. He expects an inflation rate of around two percent for 2019, which is within the target range of the Fed.
The central bank is not set to a certain number of increases. The monetary authorities could react flexibly and quickly if the economic situation required it. Wall Street prices continued to rise as the euro dropped to a daily low against the dollar. Last month’s interest rate hike saw monetary authorities raise rates for the fourth and last time in 2018 – the current range of 2.25-2.5 percent.
