Wires

UPDATE 1-Fed's Powell: No 'booming' in U.S. economy that threatens to go bust

Lindsay Dunsmuir

(Adds further quotes, details from hearing)

WASHINGTON, Nov 14 (Reuters) - Federal Reserve Chair Jerome Powell on Thursday said the risk of the U.S. economy facing a dramatic bust is remote, partly because the record-long expansion is notable for not having pockets of overheating activity.

Powell, appearing before U.S. lawmakers for a second day, reiterated his view that the current expansion appears to be on a sustainable footing, with few indications of an imminent downturn despite risks from the long-running U.S.-China trade war, a slowdown in business investment and weakness abroad.

"The U.S. economy is the star economy these days," Powell told the House of Representatives Budget Committee. "We're growing at 2%, right in that range, more than any of the other advanced economies are growing. There's no reason that can't continue."

Asked if there were any excesses that threatened to torpedo the expansion, Powell said: "Look at today's economy. There's nothing that's really booming that would want to bust, in other words."

"It's a pretty sustainable picture."

The U.S. economy is in its 11th year of expansion, although growth this year has slowed from 2018 when the Republican tax cuts fed an acceleration in activity. In the third quarter, the economy grew at a 1.9% annualized pace, down from 3.4% in the comparable period a year earlier.

U.S. manufacturing activity has been hurt as tit-for-tat tariffs between Washington and Beijing and slack demand from overseas markets have fostered uncertainty. Business investment has been a net drag on gross domestic product for the last two quarters.

Asked about the possibility the slump in manufacturing could spill over into the broader economy, Powell said central bank officials had seen no signs of that.

"That's a risk that we monitor very carefully - we don't see that yet," Powell said. "The 70% of the economy that is the consumer is healthy with high confidence, low unemployment, wages moving up."

"That is what is driving our economy now and seems to be continuing to do so."

To address concerns the expansion was at risk, in part from President Donald Trump's trade war with China, the Fed has cut interest rates three times this year. The Fed's targeted rate now stands in a range of 1.50-1.75%, down from 2.25-2.50% at midyear.

In prepared remarks earlier that were nearly identical to those delivered on Wednesday to the Joint Economic Committee, Powell said the impact of the three rate cuts this year was still to be fully felt in supporting household and business spending and will let the central bank likely hit pause on further rate moves unless there is a "material" change in the economic outlook.

Similar to Wednesday's hearing, the Fed chief was peppered with questions about the effects of the Trump administration's trade policies on the economy and the implications of rising national debt.

Powell, a frequent target of Trump's ire for not lowering interest rates further, sought to walk a fine line again in his answers in order to steer clear of politics, but noted any reductions in trade uncertainty would help business investment.

"Uncertainty is huge for business people making decisions," Powell said, adding that the ratification of the United States-Mexico-Canada Agreement (USMCA) by Congress "would be a very constructive thing for the economy."

Powell also weighed in on the U.S. national debt, which he repeated is on an unsustainable path.

(Additional reporting by Jonnelle Marte in New York Writing by Dan Burns; Editing by Tom Brown and Jonathan Oatis)