Fed's Powell Says Case for Gradual Rate Hikes Still 'Strong'

Wednesday, 20 June 2018 21:12 WIB

Federal ReserveThe FedJerome Powell


Federal Reserve Chairman Jerome Powell repeated the case he's laid out for raising interest rates to keep the world's largest economy on a sustainable path, citing broad support among his colleagues at the U.S. central bank.

'With unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong,' he said in opening remarks Wednesday at a European Central Bank forum in Sintra, Portugal.

His comments come a week after the Fed raised rates for the second time this year in response to quickening growth and falling unemployment. The median projection from Fed officials for the number of rate hikes this year also rose to four from three.

After his remarks, Powell will participate in a panel discussion with ECB President Mario Draghi, Bank of Japan Governor Haruhiko Kuroda and Reserve Bank of Australia Governor Philip Lowe.

Powell discussed the benefits of low unemployment and a tight labor market for many Americans, while noting a persistently strong economy can pose risks to inflation and perhaps financial stability.

“In the current environment, significant uncertainty attends the process of making monetary policy,” he said, though he added that he currently sees U.S. financial stability vulnerabilities as moderate. “While some asset prices are high by historical standards, I do not see broad signs of excessive borrowing or leverage,” he said.

Unemployment in the U.S. dropped to 3.8 percent in May, matching April 2000 as the lowest level for joblessness since 1969. Though it has edged up in recent months, the Fed’s preferred measure of year-over-year inflation, after excluding volatile food and energy components, remained below the central bank’s 2 percent target in April at 1.8 percent.

“Wage growth has been moderate, consistent with low productivity growth but also an indication that the labor market is not excessively tight,” Powell said.

Source: Bloomberg




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