Federal Reserve Chairman Jerome Powell, questioned by members of a House congressional committee, repeated on Wednesday that rising world protectionism would over time pose a risk to a U.S. and global expansion that appears largely on track to continue.
"If this process leads to a world of higher tariffs on a wide range of goods and services that are traded and those are sustained for a longer period of time, if it results in a more protectionist world, that would be bad for our economy," Powell told the House Financial Services Committee. "It isn`t up to us to criticize (administration) policies. But the evidence is clear that countries that remain open to trade have higher productivity. They have higher incomes."
Powell`s appearance largely retraced the testimony and questioning from a Tuesday hearing with the Senate Banking Committee.
In prepared testimony and an accompanying report Powell depicted a U.S. economy poised for perhaps years more continued growth, with the central bank close to its goals of maximum employment and inflation stable at around 2 percent.
But as with senators the day before, House members zeroed in on the possible economic consequences of the Trump administration`s imposition of tariffs, with threats of more to come, in the name of cutting better trade deals with both allies like Canada and rivals like China.
Powell has tried to walk a fine line in his responses, at once steering clear of direct criticism of the president who appointed him, while also making the economic consequences clear.
Powell said he thought the administration`s aim was to ultimately lower tariffs worldwide, and if there was disruption in the meantime "it might be worth paying a bit of a short-term price to get to a better place."
At the same time, he and other Fed officials have been clear that businesses are telling them that they already are changing spending and investment plans because of the risks and uncertainties around a possible trade conflict.
"Lots and lots of individual companies have been harmed by this. We don’t see it in the aggregate numbers yet because it is a $20 trillion dollar economy and these things take time to show up," Powell said. "But we hear many many stories of companies that are concerned and are now beginning to make investment decisions, or not make them, because of this.”
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