Powell says outlook strong, signaling gradual rate hikes
WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell, making his first public comments as leader of the nation’s central bank, told Congress Tuesday that the outlook for the U.S. economy “remains strong” despite the recent stock market turbulence.
He said that bright prospects for growth and employment will allow the Fed to continue raising its key policy rate at a gradual pace. The Fed boosted its benchmark rate three times last year and has signaled that it expects to raise rates another three times in 2018.
In a prepared statement, Powell praised Janet Yellen for the important contributions she made during her four years as the first woman to lead the Fed. He said the two had worked together to ensure “a smooth leadership transition and provide for continuity in monetary policy.”
Referring to the wild swings in the stock market that occurred earlier this month, Powell said the Fed does “not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation.”
Powell, who took office on Feb. 5, was tapped last November as the new Fed leader after President Donald Trump decided to against offering Yellen a second term. Powell, a Republican, has been on the Fed’s seven-member board since 2012.
The Fed has raised its policy rate by a quarter-point five times starting December 2015. Before then, it had kept its policy rate at a record low near zero for seven years in an effort to help the country recover from the deepest recession since the 1930s. Even with the recent hikes, the rate remains at a still-low 1.25 percent to 1.50 percent. But various market rates, including home mortgage rates, have begun rising in anticipation of further Fed rate increases.
Many economists believe the Fed, which last raised rates in December, will hike again at its next meeting in March and some analysts think the Fed could hike more than three times this year, depending on what inflation does.