Fed policy report flags strong economy, uncertain policy outlook

Fed notes stabilized and strong job market

Report flags raised financial appraisal levels

(Adds discuss productivity, Fed policy guidelines)

By Michael S. Derby

Feb 7 (Reuters) - The Federal Reserve's newest Monetary Policy Report to Congress, launched on Friday, was positive about the state of the economy however alerted about some concerning aspects of the monetary system.

The report, which comes ahead of next week's testimony before Congress by Fed Chair Jerome Powell, classicrock.awardspace.biz said main bank officials remain dedicated to getting inflation back to 2% and systemcheck-wiki.de noted that when it pertains to rates of interest policy changes officials "will thoroughly evaluate incoming data, the evolving outlook, and the balance of risks."

The release explained the overall economy as doing well amidst a strong and better-balanced task market and decreasing inflation pressures.

The Fed report said the monetary system is broadly speaking "sound and resilient." But it also kept in mind "appraisals remained high relative to basics in a variety of markets, including those for equity, corporate financial obligation, and property genuine estate."

It likewise said "appraisal pressures increased somewhat from currently high levels" while flagging that "vulnerabilities associated with monetary utilize remained notable."

The report did not appear to recommend any broad risk to the economy from the financial system and said that "credit continued to be broadly available" to mid-sized and large services, links.gtanet.com.br most households and local governments. Credit was "fairly tight" for little firms and setiathome.berkeley.edu those with credit issues.

When it pertains to total borrowing levels, overall debt levels for homes and non-financial firms "continued to trend down to a level that is really low relative to that in the previous 20 years."

The Monetary Policy Report, which comes two times annual, was based on data available to the main bank since Thursday. The report usually sums up subjects currently well known to Fed watchers and market participants.

The report comes as the Fed faces an extremely uncertain environment due to massive policy changes now contemplated or underway from President Donald Trump.

The main bank was able to decrease its rates of interest target by a full portion point last year amid alleviating inflation pressures. Future cuts, nevertheless, are highly uncertain as Trump pursues trade and labor force policies that the majority of economic experts believe will drive up inflation at a time when rate pressures remain above target. Some in the Fed have pointed straight at the federal government as a source of uncertainty limiting the guidance officials can provide about the monetary policy outlook.

The Fed report had restricted discuss the potential customers for Trump trade policies however did note "some market individuals likewise pointed to potential increases in U.S. tariffs on imports as a factor pushing the dollar higher in recent months."

The release also said strong productivity may assist the economy grow more quickly in the future without producing inflation pressures. The Fed discovered that emerging artificial intelligence innovation hadn't done much yet to goose performance however said the impact "might grow as AI utilize ends up being more extensive."

While the report didn't have much assistance about the outlook for monetary policy, it did acknowledge that the present 4.25-4.50% federal funds target rate range followed the level recommended by policy rules. Officials don't utilize rules to set policy however view them as factors worth considering as they determine the right level for larsaluarna.se short-term rate of interest. (Reporting by Michael S. Derby; Editing by Andrea Ricci)