Fed policy report flags solid economy, uncertain policy outlook

Fed keeps in mind stabilized and strong job market

Report flags raised monetary appraisal levels

(Adds discuss 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 upbeat about the state of the economy but alerted about some concerning elements of the system.

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

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

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

It also said "appraisal pressures increased somewhat from currently high levels" while flagging that "vulnerabilities related to financial leverage remained noteworthy."

The report did not appear to suggest any broad hazard to the economy from the financial system and said that "credit continued to be broadly available" to mid-sized and wiki.die-karte-bitte.de large organizations, many homes and city governments. Credit was "fairly tight" for little companies and those with credit problems.

When it pertains to general borrowing levels, overall financial obligation levels for homes and non-financial firms "continued to trend down to a level that is extremely low relative to that in the past 2 decades."

The Monetary Policy Report, which comes twice annual, was based on information available to the main bank since Thursday. The report typically summarizes subjects currently popular to Fed watchers and market participants.

The report comes as the Fed faces an extremely uncertain environment due to massive policy modifications now pondered or underway from President Donald Trump.

The main bank had the ability to lower its interest rate target by a complete percentage point in 2015 amidst relieving inflation pressures. Future cuts, however, are highly uncertain as Trump pursues trade and workforce 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 government as a source of uncertainty restricting the guidance officials can supply about the monetary policy outlook.

The Fed report had actually restricted talk about the prospects for Trump trade policies but did note "some market individuals also pointed to possible increases in U.S. tariffs on imports as an element pushing the dollar higher in current months."

The release also said strong performance may assist the economy grow quicker in the future without developing inflation pressures. The Fed found that emerging artificial intelligence innovation had not done much yet to goose performance however said the impact "may grow as AI utilize becomes more extensive."

While the report didn't have much guidance about the outlook for financial policy, it did acknowledge that the current 4.25-4.50% federal funds target rate variety was constant with the level recommended by policy guidelines. Officials do not use guidelines to set policy however view them as aspects worth considering as they figure out the best level for short-term rates of interest. (Reporting by Michael S. Derby; Editing by Andrea Ricci)