The U.S. economy remains strong, but dangers are brewing, Federal Reserve Chairman Jerome Powell told a Senate committee Tuesday.
In his semiannual testimony on the state of monetary policy, the central bank chief noted that the Fed is watching the state of affairs closely and is prepared to adapt policy if warranted. In all, he called the U.S. economic outlook "generally favorable" but one that faces challenges from abroad.
"While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals," Powell said in his prepared remarks to the Senate Committee on Banking, Housing and Urban Affairs. "Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year."
China and Europe are particular areas of concern, and the Fed is watching how Brexit negotiations and trade talks play out.
"We will carefully monitor these issues as they evolve," Powell said.
The Fed has been caught in a market crossfire in the past several months, triggered by worries that it was on a set policy path and would continue tightening even if conditions weakened. More recently, though, officials have been conveying a message of patience with the future policy path, including both the approach to interest rates and to reducing the bonds the Fed holds on its balance sheet.