Fed chief sees more gradual rate hikes despite trade uproar
Washington, US – US Federal Reserve chairman Jerome Powell backed further gradual interestrate increases amid strong US economic momentum, in remarks that avoided the turbulent US stock market and sought to steer clear of the simmering US-China trade dispute.
“We will continue to aim for two per cent inflation and for a sustained economic expansion with a strong labor market,” Powell said Friday in his first speech since becoming chairman in February. “As long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals.”
US stocks extended losses after his remarks, with the S&P 500 Index ending 2.2 per cent lower Friday as investors took note of Powell’s reluctance to be swayed from raising rates. His remarks were reinforced by comments several hours later by incoming New York Fed chief John Williams.
“I guarantee you they are thinking about it,” Roberto Perli, a partner at Cornerstone Macro said. “It is hard to think that any more bad news on tariffs doesn’t reduce the odds of faster tightening down the road.”
Powell’s prepared comments, which included no reference to China or financial markets, hewed closely to his March 21 press conference that emphasized the stronger US economic outlook after the Fed raised interest rates and signaled at least two more moves in 2018.
Asked subsequently about the tariff debate, he said it’s “really too early” to estimate how tariffs will impact the US economy.
Williams, who is currently head of the Fed’s San Francisco branch, backed projections for three or four rate hikes this year and called his outlook “very positive” with “low and falling unemployment, and inflation that is closing in on our 2 percent longrun goal.”
Powell said reports from the labor market were mixed, with some indicators showing tightness and others showing slack.
“The absence of a sharper acceleration in wages suggests that the labor market is not excessively tight,” Powell said. “I will be looking for an additional pickup in wage growth as the labor market strengthens further.”