U.S. economic outlook still ‘strong’: Powell
Federal Reserve Chairman Jerome Powell told Congress Tuesday that the outlook for the U.S. economy “remains strong” despite the recent stock market turbulence, keeping the central bank on track to gradually raise interest rates.
Making his first public comments as leader of the nation’s central bank, Powell depicted an economy that was gaining strength and stressed that he intended to follow the approach to interest rates set by his predecessor, Janet Yellen. The Fed boosted its benchmark rate three times last year and has signalled that it expects to raise rates another three times in 2018.
In his statement, Powell praised Yellen for the important contributions she made during her four years as the first woman to lead the Fed. He said the two had worked together to ensure “a smooth leadership transition and provide for continuity in monetary policy.”
Referring to the wild swings in the stock market earlier this month, he said the Fed does “not see these developments as weighing heavily on the outlook for economic activity, the labour market and inflation.”
Powell, who took office on Feb. 5, was tapped last November as the new Fed leader after President Donald Trump decided against offering Yellen a second term.
The Fed has raised its policy rate by a quarter-point five times starting December 2015. Before then, it had kept its policy rate at a record low near zero for seven years in an effort to help the country recover from the deepest recession since the 1930s. Even with the recent hikes, the rate remains at a stilllow 1.25 per cent to 1.50 per cent. But various market rates have begun rising in anticipation of further Fed rate increases.
Treasury yields climbed immediately after Powell said his personal outlook on the economy had strengthened since December. That observation appeared to raise expectations that the Fed could become more aggressive about raising interest rates.
Many economists believe the Fed will hike again at its next meeting in March and some analysts think the Fed could hike more than three times this year, depending on what inflation does.