Powell casts himself as a figure of stability for the Fed

WASHINGTON (AP) — Jerome Powell says that if confirmed as the next chairman of the Federal Reserve, he expects the Fed to continue raising interest rates gradually to support its twin goals of maximum employment and stable prices.

Under his leadership, Powell also says, the Fed would consider ways to ease the regulatory burdens on banks while preserving the key reforms Congress passed to try to prevent another financial crisis.

Powell’s comments came in written testimony prepared for his confirmation hearing Tuesday before the Senate Banking Committee.

A member of the Fed’s board since 2012, Powell was nominated by President Donald Trump to succeed Janet Yellen after her four-year term as chair ends in February. Trump decided against offering Yellen a second term.

In his remarks released Monday, Powell sought to send the reassuring message that he would represent a figure of stability and continuity at the nation’s central bank while remaining open to making certain changes as appropriate.

On banking regulations, Powell said in his testimony, “We will continue to consider appropriate ways to ease regulatory burdens while preserving core reforms ... so that banks can provide the credit to families and businesses necessary to sustain a prosperous economy.”

Among those reforms, Powell mentioned the stricter standards for capital and liquidity that banks must maintain under the Dodd-Frank financial reform law and the annual “stress tests” that the biggest banks must undergo to show they could withstand a severe downturn.

Regarding interest rates, Powell said, “We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink.” The Fed has begun gradually shrinking its balance sheet, which swelled after the financial crisis from bond purchases it made to help reduce long-term borrowing rates.

The Yellen Fed has raised rates four times starting in December 2015, including two rate hikes this year. Economists expect a third rate hike to occur in December, and they’re projecting at least three additional rate increases in 2018.

Powell cautioned that while Fed officials want to make the path of interest rate policy as predictable as possible, “the future cannot be known with certainty.” For that reason, he said, it’s important for the Fed to retain the flexibility it needs to adjust its policies in response to economic developments.