Powell said the Fed would "act appropriately to support the expansion"

US Federal Reserve Chairman Jerome Powell said the central bank was watching the economic situation closely and would do everything in its power to keep record-breaking expansion.

Financial markets have been worried recently by the escalation of the trade war from China, which could now include Mexico. At the same time, government bond yields behave as in the past, a reliable indicator of the recession.

Powell began a speech in Chicago on Tuesday, citing "recent developments in trade and other negotiations."

"We do not know how or when these problems will be solved," he said. "We are closely monitoring the implications of these developments for the US economic outlook and, as always, we will act appropriately to support the expansion, with a strong job market and inflation close to our symmetric target of 2% . "

Powell's comments were discussed at the "Conference on Monetary Strategy, Tools and Communication Practices", kick off a review that the Fed is conducting this year on the tools needed to reach its objectives as well as how it communicates its actions to the public. .

It did not address any other specific issue related to current conditions. On the whole, markets expect the Federal Open Market Committee to reduce its benchmark rate twice before the end of the year due to current conditions.

For its part, Powell maintained the position that the Fed remains dependent on the data. The latest FOMC news release, released last May, indicated that the committee was patient with policy changes in response to changing conditions.

In his speech on Tuesday, Powell took a longer-term view, outlining the challenges the Fed will face in the next crisis. The current low interest rate environment leaves little room for the Fed to reach the lower zero limit or the point where the Fed's nominal reference rate can no longer be lowered further.

"In short, the proximity of interest rates to the PEM has become the main challenge of the monetary policy of our time, tainting all kinds of problems related to the risk of the ELP and conferring more importance to d & # 39; Old challenges, "he said.

The Fed is facing a problem of inflation, which has not yet been achieved by the 2% target of the central bank. According to Mr Powell, still persistent inflation could lead to "a downward drift difficult to stop".

For the future, three main considerations are to be taken into account: the current policy is sufficient to remedy inflationary errors; if the panoply of Fed rate movements and asset purchases is enough to fulfill the dual mandate of full employment and price stability, and the best way to communicate the policy to the public.

One consideration is whether the "dot plot" of the rate projections of individual FOMC members is useful. Powell suggested that during periods of stress, the "mid-point", closely followed, could become the "least likely outcome".

Powell said the tools used during the crisis – rates close to zero and asset purchases that hit the balance sheet at more than $ 4.5 trillion – should be rolled out again.

"Perhaps it is time to abandon the term" unconventional "by referring to the tools used during the crisis.We know that such tools will probably be needed in one form or another in future ELB episodes, which we hope will be rare, "he said.