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Fed policy report flags strong economy, uncertain policy outlook

Fed notes supported and strong job market

Report flags raised monetary appraisal levels

(Adds remarks on performance, Fed policy rules)

By Michael S. Derby

Feb 7 (Reuters) - The Federal Reserve's latest Monetary Policy Report to Congress, released on Friday, was positive about the state of the economy but cautioned about some worrying aspects of the financial system.

The report, which comes ahead of next week's testament before Congress by Fed Chair Jerome Powell, said main bank authorities remain dedicated to getting inflation back to 2% and bybio.co kept in mind that when it pertains to interest rate policy modifications officials "will thoroughly examine incoming data, the developing outlook, and the balance of risks."

The release explained the total economy as doing well amid a solid and better-balanced job market and declining inflation pressures.

The Fed report said the financial system is broadly speaking "sound and durable." But it also kept in mind "appraisals remained high relative to fundamentals in a series of markets, including those for equity, business financial obligation, and residential real estate."

It likewise said "appraisal pressures increased rather from already high levels" while flagging that "vulnerabilities connected with monetary take advantage of remained significant."

The report did not appear to suggest any broad hazard to the economy from the monetary system and said that "credit continued to be broadly available" to mid-sized and large services, a lot of families and . Credit was "fairly tight" for little firms and those with credit problems.

When it pertains to overall borrowing levels, total financial obligation levels for households and non-financial firms "continued to trend down to a level that is very low relative to that in the past 20 years."

The Monetary Policy Report, which comes twice yearly, was based on data available to the main bank as of Thursday. The report normally summarizes topics already popular to Fed watchers and market participants.

The report comes as the Fed faces a highly uncertain environment due to large-scale policy modifications now pondered or underway from President Donald Trump.

The main bank had the ability to reduce its rate of interest target by a complete percentage point last year amidst relieving inflation pressures. Future cuts, championsleage.review nevertheless, are highly uncertain as Trump pursues trade and labor force policies that many economists think will increase inflation at a time when rate pressures remain above target. Some in the Fed have actually pointed straight at the federal government as a source of uncertainty limiting the guidance authorities can offer about the financial policy outlook.

The Fed report had limited talk about the potential customers for systemcheck-wiki.de Trump trade policies but did keep in mind "some market individuals also indicated prospective boosts in U.S. tariffs on imports as a factor pushing the dollar higher in recent months."

The release likewise said strong efficiency might help the economy grow faster in the future without producing inflation pressures. The Fed found that emerging artificial intelligence innovation hadn't done much yet to goose productivity but said the impact "might grow as AI use becomes more widespread."

While the report didn't have much guidance about the outlook for monetary policy, photorum.eclat-mauve.fr it did acknowledge that the existing 4.25-4.50% federal funds target rate range followed the level suggested by policy guidelines. Officials do not use rules to set policy but see them as aspects worth considering as they determine the right level for short-term rates of interest. (Reporting by Michael S. Derby; Editing by Andrea Ricci)