"If there were going to be a permanent effect or a lasting effect, let’s say, it would be from a longer shutdown or perhaps a second shutdown, and that would be through the channel of a loss of confidence in our ability to make policy in the United States," Powell said on Wednesday.
Powell also said that US trade policy is a source of concern at the Federal Reserve, even though the present level of tariffs is not enough in both the United States and China to have material effects on the GDP of either nation’s economy.
"The concern is a longer, drawn out set of negotiations back and forth which could result in sapping business confidence," Powell said. "Uncertainty is not the friend of business."
On 25 January, Trump signed a temporary three-week budget to end the shutdown without getting the $5.7 billion he had demanded from the Congress for a wall along the southern border. Trump is reportedly expected to continue talks with the Democrats on the full-fledged budget within next three weeks.
The US federal government had been partially shut down since 22 December due to a funding dispute between Trump and congressional Democrats. Trump has asked Congress to authorize $5.7 billion to build a wall along the US border with Mexico, but Democrats have refused to meet the demand.