Powell Reiterates There's 'No Risk-Free Path' As Fed Navigates Tension Between Dual Goals

(RTTNews) - Federal Reserve Chair Jerome Powell spoke at the 67th Annual Meeting of the National Association for Business Economics in Philadelphia on Tuesday but did not provide much fresh insight into the outlook for interest rates.

Powell reiterated his belief that there is "no risk-free path" for monetary policy as the Fed navigates the tension between the central bank's dual goals of maximum employment and inflation at a rate of 2 percent over the longer run.

He said the challenge facing the Fed was evident in the dispersion of officials' projections at the September 16-17 monetary policy meeting.

"I will stress again that these projections should be understood as representing a range of potential outcomes whose probabilities evolve as new information informs our meeting-by-meeting approach to policymaking," Powell said.

He added, "We will set policy based on the evolution of the economic outlook and the balance of risks, rather than following a predetermined path."

Powell also acknowledged the delay of the release of some key economic data due to the ongoing government shutdown but noted the Fed routinely reviews a wide variety of public- and private-sector data that have remained available.

"Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago," Powell said.

He continued, "Data available prior to the shutdown, however, show that growth in economic activity may be on a somewhat firmer trajectory than expected."

The Fed chief pointed to rising downside risks to employment that have shifted the assessment of the balance of risks, leading to the quarter point rate cut at the central bank's September meeting.

The central bank's next monetary policy meeting is scheduled for October 28-29, with CME Group's FedWatch Tool currently indicating a 96.7 percent chance the Fed will lower rates by another quarter point.

Powell's remarks largely focused on the Fed's balance sheet, which he described as one of the more arcane and technical aspects of monetary policy.

Notably, Powell said the Fed may approach a point in "coming months" when it will stop its balance sheet runoff if reserves are somewhat above the level judged consistent with ample reserve conditions.