jerome h powell : semiannual monetary policy report to the congress testimony by mr jerome h powell, chairman of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 26 february 2019. * * * good morning. chairman crapo, ranking member brown, and other members of the committee, i am happy to present the federal reserve ’ s semiannual monetary policy report to the congress. let me start by saying that my colleagues and i strongly support the goals congress has set for monetary policy — maximum employment and price stability. we are committed to providing transparency about the federal reserve ’ s policies and programs. congress has entrusted us with an important degree of independence so that we can pursue our mandate without concern for short - term political considerations. we appreciate that our independence brings with it the need to provide transparency so that americans and their representatives in congress understand our policy actions and can hold us accountable. we are always grateful for opportunities, such as today ’ s hearing, to demonstrate the fed ’ s deep commitment to transparency and accountability. today i will review the current economic situation and outlook before turning to monetary policy. i will also describe several recent improvements to our communications practices to enhance our transparency. current economic situation and outlook the economy grew at a strong pace, on balance, last year, and employment and inflation remain close to the federal reserve ’ s statutory goals of maximum employment and stable prices our dual mandate. based on the available data, we estimate that gross domestic product ( gdp ) rose a little less than 3 percent last year following a 2. 5 percent increase in 2017. last year ’ s growth was led by strong gains in consumer spending and increases in business investment. growth was supported by increases in employment and wages, optimism among households and businesses, and fiscal policy actions. in the last couple of months, some data have softened but still point to spending gains this quarter. while the partial government shutdown created significant hardship for government workers and many others, the negative effects on the economy are expected to be fairly modest and to largely unwind over the next several months. the job market remains strong. monthly job gains averaged 223, 000 in 2018, and payrolls increased an additional 304, 000 in january. the unemployment rate stood at 4 percent in january, a very low level by historical standards, and job openings remain abundant. moreover, the ample availability of job opportunities appears to have encouraged some people to join the workforce

and liquidity constraints. like central banks, swfs have traditionally been investors in highly rated fixed income assets. going forward, swfs will increasingly look for investments in equity markets, both public and private ones. several of these investments have recently produced headlines in the global financial press. slide 9 depicts some of them. 3. the challenges in my introductory comments, i suggested that much of the anxiety surrounding swfs stems from the fact that their increasing presence in mature markets presents a challenge to some long - held assumptions about how the global economy works. let me elaborate a little bit on three such assumptions. as you will see, they are very much interlinked. this is shown in table 1 in the appendix. sources : truman ( 2007a, 2007b ), imf, morgan stanley, ft. morgan stanley, standard chartered, deutsche bank and merrill lynch all recently produced estimates, ranging from usd 2. 5 to 3. 5 trillion. global reserves amounted to usd 4. 7 trillion in the second quarter of 2007, according to imf's cofer database. 2006 estimate by mckinsey global institute. the size of pension fund assets held by oecd countries is estimated at usd 13. 2 trillion by the oecd. the estimates of merrill lynch, deutsche bank, morgan stanley and standard chartered are, respectively, that swfs will grow to usd 7. 9 trillion by 2011, usd 9 trillion by 2015, usd 12 trillion in 2015 and usd 13. 40 trillion by 2017. according to snb calculations, excess reserves of developing countries according to the greenspan - guidotti rule reached usd 2. 5 trillion in the second quarter of 2007. these are located in the us ( alaska permanent reserve fund ), australia and norway. first, since the early 1980s, we have witnessed broad - based and sustained political momentum to deregulate and liberalise economic structures, enhance the role of market forces and attempt to reduce the role of governments in the global economy. looking back, ronald reagan ’ s confrontation with the air traffic controllers union in 1981 marks the beginning of this process. most of you in this room would probably concur with the premise that the secular trend to strengthen the role of free markets and competition as the overarching organising principles of the global economy has contributed significantly to the long period of prosperity that the world economy has enjoyed. in this context, swfs represent a potential threat. sizeable state - sponsored foreign investments in mature economies can be perceived