Jerome Powell: The Fed will continue to raise interest rates gradually: Jerome Powell

WASHINGTON (Reuters) – The Federal Reserve will continue to raise rates gradually as the economic outlook remains strong despite uncertainty over trade policy, Fed Chairman Jerome Powell said Tuesday.

Powell was optimistic about the US economy, noting that job creation remained strong and that inflation was just around the Fed's two percent target.

In addition to the recent tax cut, business investment is boosting consumer spending and corporate investment remains strong, he said in his semiannual testimony to the Senate Finance Committee.

However, he acknowledged that it was "difficult to predict the end result of current trade policy discussions," a clear reference to President Donald Trump's aggressive tariff policies against China and many partners. American commercials.

The International Monetary Fund warned on Monday against escalating trade tensions and tariff threats, if implemented, could disrupt global growth and derail investments.
However, Powell said the Federal Open Market Committee of the Fed was pleased with the central bank's efforts to bring monetary policy back to normal by raising rates and reducing the size of the investments accumulated as a result of the financial crisis. 2008.

"With a strong labor market, inflation close to our target and risks to the balanced outlook, the FOMC believes that – for now – the best solution is to continue to gradually increase the federal funds rate." said in his prepared testimony.

The FOMC increased the benchmark loan rate by a quarter of a percentage point in March and June, and most economists expect two more rate hikes this year.

After two percent GDP growth in the first three months of the year, "the latest data suggests that economic growth in the second quarter was considerably stronger than in the first," Powell said. to legislators.

The Fed chief will answer questions from legislators after his testimony, which could provide more details on his thinking of the threats to the economy.

Despite strong growth and the recent rise in gasoline prices, the Fed was also optimistic about the inflation situation, claiming that the rate had gradually risen after it was stubbornly lowered but had not accelerated too quickly.

The central bank's preferred measure of inflation rose 2.3% in the twelve months to May, up from 1.5% a year earlier.

However, excluding the volatile prices of food and energy, the "core" inflation rate was 2%.

million. Powell said policymakers would closely monitor inflation indicators, aware that too slow an increase in interest rates could allow prices to rise too quickly, while a rise in too aggressive could weaken the economy.

The economic recovery has sustained strong job gains, averaging 215,000 per month in the first half of 2018, "far higher than the average number of people entering the labor market each month," did he declare.

And the unemployment rate of 4.0% is near the lowest in 20 years, and may be reaching the goal of full employment of the Fed.

And he noted that the number of people on the labor market has remained stable, which is "a sign of the strength of the labor market", given the retirement of the baby boomer generation .

Wage growth remains low and has not yet recovered to its pre-crisis level, he said.

"On a more positive note, moderate wage growth also tells us that the job market is not causing high inflation," Powell said.