WILL DO WHATEVER IT TAKES FOR US ECONOMY: FED CHIEF
Says gradual interest hikes likely needed if economy stays healthy
Avoiding any direct reference to President Donald Trump’s renewed criticism of the Federal Reserve’s handling of the economy, Fed chief Jerome Powell said on Friday the central bank would do “whatever it takes” to head off inflation or react to a new crisis.
Trump’s latest attacks, delivered in an interview this week, meant politics cast a shadow on the highly anticipated speech, the highlight of the annual gathering of global central bankers in Jackson Hole, Wyoming, an idyllic setting in the American West for serious discussions on how to manage the economy.
Powell said the fundamentals of the U.S. economic expansion look strong and support the case for continued gradual interestrate increases.
“There is good reason to expect that this strong performance will continue,” Powell said. “I believe that this gradual process of normalisation remains appropriate.”
US central bankers are raising interest rates gradually to keep inflation in check while at the same time giving the nearly decade-long expansion room to run. The policy has attracted the ire of President Donald Trump, who told Reuters in a recent interview that he was “not thrilled” with the Fed’s tightening. US stocks rose and the dollar slipped as investors digested Powell’s first speech as Fed chief at Jackson Hole. Yields on the 10-year Treasury note were initially lifted before settling back to levels prior to his remarks.
Powell’s speech discussed at length the challenges of monetary policy at a time when economic benchmarks — such as estimates of full employment or the neutral policy rate — are uncertain. The two risks faced by the Federal Open Market Committee are moving too fast and shortening the expansion, or moving too slowly and allowing for overheating and financial excesses, he said.
“I see the current path of gradually raising interest rates as the FOMC’s approach to taking seriously both of these risks,” Powell said.