Fed’s Powell sees gradual rate hikes amid strong US growth outlook

Federal Reserve chairman Jerome Powell said the central bank can continue gradually raising interest rates as the outlook for growth remains strong, and the recent bout of financial volatility shouldn’t weigh on the US economy.

“Some of the headwinds the US economy faced in previous years have turned into tailwinds,” Powell said in written testimony to the House Financial Services Committee on Tuesday in Washington. “Fiscal policy has become more stimulative and foreign demand for US exports is on a firmer trajectory.’’

Powell takes charge of the ratesetting Federal Open Market Committee (FOMC) at a time when the world’s largest economy may be shifting to faster growth, somewhat higher inflation and declining unemployment. Adding to the momentum are tax cuts and spending increases by the federal government.

“In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2% on a sustained basis,’’ Powell said, in his first public appearance before Congress as Fed chief. PCE refers to the personal consumption expenditures index.

The recent correction in the stock market and rising rates on US government debt shouldn’t hamper growth, he said.

WASHINGTON:US

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