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 guidelines)

By Michael S. Derby

Feb 7 (Reuters) - The Federal Reserve's newest Monetary Policy Report to Congress, launched on Friday, was upbeat about the state of the economy however cautioned about some worrying elements of the monetary system.

The report, which comes ahead of next week's statement before Congress by Fed Chair Jerome Powell, said main bank officials remain committed to getting inflation back to 2% and noted that when it pertains to rate of interest policy modifications authorities "will thoroughly evaluate incoming data, the progressing outlook, and the balance of threats."

The release explained the overall economy as succeeding in the middle of a solid and better-balanced job market and decreasing inflation pressures.

The Fed report said the monetary system is broadly speaking "sound and durable." But it likewise noted "appraisals remained high relative to principles in a variety of markets, including those for equity, business financial obligation, and domestic real estate."

It also said "appraisal pressures increased somewhat from already high levels" while flagging that "vulnerabilities associated with financial take advantage of remained significant."

The report did not appear to suggest any broad danger to the economy from the monetary system and said that "credit continued to be broadly available" to mid-sized and large organizations, the majority of families and city governments. Credit was "fairly tight" for kenpoguy.com small firms and those with credit issues.

When it pertains to general borrowing levels, total debt levels for homes and non-financial companies "continued to trend down to a level that is really low relative to that in the past 2 decades."

The Monetary Policy Report, which comes two times yearly, was based upon information available to the main bank as of Thursday. The report usually summarizes topics already well understood to Fed watchers and market participants.

The report comes as the Fed deals with a highly uncertain environment due to massive policy modifications now pondered or underway from President Donald Trump.

The main bank had the ability to reduce its rates of interest target by a complete percentage point in 2015 amidst alleviating inflation pressures. Future cuts, nevertheless, smfsimple.com are extremely uncertain as Trump pursues trade and labor force policies that most financial experts believe will increase inflation at a time when cost pressures remain above target. Some in the Fed have pointed straight at the federal government as a source of uncertainty restricting the guidance authorities can provide about the monetary policy outlook.

The Fed report had restricted talk about the prospects for Trump trade policies but did keep in mind "some market participants also pointed to potential increases in U.S. tariffs on imports as an aspect pressing the dollar higher in current months."

The release likewise said strong efficiency might help the economy grow more quickly in the future without producing inflation pressures. The Fed discovered that emerging artificial intelligence innovation had not done much yet to goose performance but said the influence "might grow as AI use becomes more widespread."

While the report didn't have much assistance about the outlook for monetary policy, it did acknowledge that the current 4.25-4.50% federal funds target rate variety followed the level recommended by policy rules. Officials do not use rules to set policy but see them as elements worth considering as they determine the best level for short-term interest rates. (Reporting by Michael S. Derby; by Andrea Ricci)