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But Powell noted that there's a wide difference of opinion about it.Īfter having kept its key policy rate near zero for seven years to help lift the economy out of the Great Recession, the Fed has raised rates seven times, most recently in March and June this year. The Fed's economic projections, compiled from estimates of all its officials, estimates the current neutral rate at 2.9 percent. He said there is also much uncertainty over the 'neutral' rate of inflation - the point at which the Fed's policy rate is neither stimulating economic growth nor holding it back. Powell focused his remarks in part on the difficulty the Fed faces in setting interest-rate policies at a time when the economy seems to be undergoing changes that challenge long-standing beliefs of how low unemployment can fall before it ignites inflation pressures. Louis regional bank, said Friday in an interview on CNBC. 'We have a mandate by law, and we do the best we can to hit the mandate' of maximizing employment and stabilizing prices, James Bullard, president of the Fed's St. Though Powell chose not to mention Trump's criticism, other Fed officials asserted that the president's complaints about rate hikes would have no effect on their policymaking. Pearce said he saw Powell's comments as signaling that the central bank will continue raising rates gradually over the next year. 'Powell deliberately avoided commenting on the latest developments on trade policy, politics and risks from abroad,' said Michael Pearce, senior U.S. In his view, that's why the Fed can continue with a gradual pace of rate hikes that began under Yellen. Powell has stressed that while unemployment is historically low and inflation has risen slightly, there's no sign that the economy is overheating. and global economic growth the longer it goes on.Įconomists said Powell's remarks Friday echoed the message he has sent since succeeding Janet Yellen as Fed leader in February. In his speech, Powell did not directly address what many analysts see as the most serious threat to the economy: The trade war that Trump has launched with America's main trading partners - a conflict that risks depressing U.S. On Thursday, two top Fed officials made clear Thursday that Trump's criticism won't affect their decisions on whether to continue raising rates.

Many have seen Trump's complaints about the Fed's rate hikes as an intrusion on the central bank's longstanding independence from political influence. The president has complained that the Fed's tightening of credit could threaten the continued strong growth he aims to achieve through the tax cuts enacted late last year, a pullback of regulations and a rewriting of trade deals to better serve the United States. Powell made no mention of the recent public criticism from President Donald Trump, who has said he is unhappy with the Fed's rate hikes. The Dow Jones industrial average closed up 133 points - about half a percentage point - and bond prices rose as well. The chairman's measured tone about the economy and his message that the Fed plans to stick with a gradual pace of rate hikes appeared to meet approval with investors. and global economies into deep recessions. We are setting policy to do what monetary policy can do to support continued growth, a strong labor market and inflation near 2 percent.'Īt the same time, Powell said that in case of another financial crisis or intensified concern about high inflation, 'We will do whatever it takes.' That echoed a phrase that was used to describe the extraordinary steps the Fed and other central banks took after the 2008 financial crisis plunged the U.S.

'Inflation is near our 2 percent objective and most people who want a job are finding one.

economy and said the Fed's incremental approach to raising rates has so far succeeded. Powell sketched a positive picture of the U.S. 'My colleagues and I,' the Fed chairman said in his speech, '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 percent.'

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