11:13 AM, Aug 24, 2018 — Federal Reserve Chairman Jerome Powell said more increases in the benchmark US lending rate are likely if the recent strong pace of growth in wages and jobs continues.
The Federal Open Market Committee’s consensus is that the “gradual process of normalization remains appropriate” as marked by rate hikes and a decline in the assets bought during the financial crisis to shore up the world’s biggest economy, Powell said on Friday at the annual Kansas City Fed symposium in Jackson Hole, Wyoming.
“The economy is strong,” Powell said in his speech. “Inflation is near our 2% objective, and most people who want a job are finding one.”
The FOMC has been raising rates since December 2015, with two hikes of 25 basis points each already this year, and many analysts expecting another two for 2018. That’s as the US unemployment rate drops and economic growth surged to 4.1% in the second quarter.
The chairman’s speech comes after President Donald Trump offered a rare rebuke from the White House to the central bank, telling Reuters this week that he was “not thrilled” with the Fed’s hikes under Powell, whom Trump nominated for the job. That followed similar criticism made last month.
“With solid household and business confidence, healthy levels of job creation, rising incomes, and fiscal stimulus arriving, there is good reason to expect that this strong performance will continue,” Powell said.
Still, he noted that the US economy faces challenges “beyond the reach of monetary policy” including slow growth in real wages, declining economic mobility and a federal budget that’s “long been on an unsustainable path.”
Discussions at the FOMC have been focused on the debate about navigating the risks between moving too fast and “needlessly shortening” the current period of economic expansion, or going too slowly and “risking a destabilizing overheating,” Powell said.
“I see the current path of gradually raising interest rates as the FOMC’s approach to taking seriously both of these risks,” the chairman said. “My colleagues and I are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2%.”