The US economy will grow at a solid though slower pace in 2019 and the Federal Reserve will remain "patient" in deciding whether to further raise interest rates, Fed chairman Jerome Powell says.
Powell reaffirmed the policy shift made by the US central bank last month, telling a Senate Banking Committee hearing on Tuesday that "cross currents and conflicting signals" had weakened the case for further rate increases and made an otherwise positive economic outlook less certain.
"We view current economic conditions as healthy and the economic outlook as favourable," Powell told lawmakers, projecting that the economy would expand at a solid pace in 2019, albeit somewhat slower than in 2018, and the job market would remain strong.
The Fed now estimates that gross domestic product grew by slightly less than 3 per cent in 2018. The US government is scheduled on Thursday to release its fourth-quarter GDP report, which was delayed by the recent partial US government shutdown.
"Some data have softened but still point to spending gains this quarter," Powell said, highlighting the sometimes contradictory set of information the Fed grappled with at year's end.
That included a global market sell-off, fears of a widening US-China trade war, slow growth among major US trading partners, and worries that the Fed itself would raise rates more aggressively than conditions warranted.
Recent retail sales data were disappointing and some Fed officials have worried that inflation could slip, though Powell said the central bank still feels the pace of price increases will remain close to its 2 per cent target after accounting for the temporary influence of lower oil prices.
The recent 35-day government shutdown added to those US growth concerns, though Powell said it is expected to have had a fairly modest impact on the overall economy that will largely unwind in the coming weeks as workers, for example, receive back pay for missed time.
Powell is also due to appear before the House Financial Services Committee on Wednesday. The two hearings are part of the semi-annual rounds of testimony the Fed chief delivers to congress each year.
It will be Powell's first since Democrats won control of the House of Representatives in the November elections.
Questions from senators on Tuesday ranged across a variety of issues, from the sources of rural poverty to the stance the Fed would take towards a proposed mega-merger between US regional lender BB&T Corp and rival SunTrust Banks Inc .
After raising rates four times in 2018, and anticipating further hikes in 2019, the Fed in January switched to a new "patient" stance as concerns about the global economy took root, and global markets voiced doubts about the US recovery.
In addition, the Fed is now debating when and how to stop the monthly rundown of its balance sheet, an issue that has been a priority particularly for Republican lawmakers who generally want the central bank to have a smaller financial footprint.
Recent comments by Fed officials have pointed to the likely need for a larger balance sheet, currently at around $US4 trillion, and a willingness to use it more regularly to fight future economic downturns.
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