Gradual rate hikes if U.S. economy stays strong: Fed chair
WASHINGTON Federal Reserve chairman Jerome Powell signalled Friday he expects the Fed to continue gradually raising interest rates if the U.S. economic expansion remains strong.
Powell added that while annual inflation has risen to near the Fed’s 2 per cent target rate, it doesn’t seem likely to accelerate above that point. That suggests he doesn’t foresee a need for the Fed to step up its rate hikes. Next month, the Fed is widely expected to resume raising rates.
Speaking to central bankers in Jackson Hole, Wyoming, Powell said the Fed recognizes the need to strike a careful balance between maximizing employment and keeping price increases stable. He said a gradual approach to rate hikes is the best way to navigate between the risks of raising rates too fast and “needlessly shortening the expansion” and moving too slowly and risking an overheated economy.
Powell sketched a positive picture of the U.S. economy and said the Fed’s incremental approach to raising rates has so far succeeded.
“The economy is strong,” he said. “Inflation is near our 2 per cent objective and most people who want a job are finding one. We are setting policy to do what monetary policy can do to support continued growth, a strong labour market and inflation near 2 per cent.”
The chairman’s message appeared to meet approval with investors. The Dow Jones industrial average was up about 160 points in early afternoon trading, and bond prices rose as well.
Powell made no mention of the recent public criticism from President Donald Trump, who has said he is unhappy with the Fed’s rate hikes. The president has complained that the Fed’s tightening of credit could threaten the continued strong growth he aims to achieve through the tax cuts enacted late last year.