Powell keeps quiet on Fed policy, but urges "flexible" approach to forecasting

Federal Reserve chair Jerome Powell gave no hints at future monetary policy in an eagerly awaited speech in Washington on Wednesday, but did call on economists to be "flexible and dynamic" in their assessments of the economic outlook.

A week after the Fed kept interest rates unchanged, expectations have risen that the central bank may be done with further rate hikes in the current cycle, particularly with labour-market conditions beginning to soften. And so all eyes are turning to every speech by policymakers in hopes that they may give some indication as to when monetary policy may begin to ease.

At a conference for the Research & Statistics (R&S) division of the Fed, celebrating the 100-year anniversary of the unit's creation, Powell thanked his colleagues for their work in aiding the Federal Open Market Committee with data and analysis on financial and economic issues.

However, Powell did not make any reference to current monetary policy, like many had hoped for. Instead, he urged the R&S division to be flexible on their methods for forecasting.

"Economic models can do a reasonably good job of capturing the working of the economy over past decades. Of course, even with state-of-the-art models and even in relatively calm times, the economy frequently surprises us.

"But our economy is flexible and dynamic, and subject at times to unpredictable shocks, such as a global financial crisis or a pandemic. At those times, forecasters have to think outside the models."