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WASHINGTON – The US economy is experiencing "a set of remarkably positive economic circumstances," Federal Reserve Chairman Jerome Powell said Wednesday, noting he sees little risk of thwarting current economic development.
"There is no reason to think that this cycle can not continue for a long time, indeed indefinitely," said Powell during a lively discussion with Judy Woodruff of PBS News Hour, at the Atlantic Festival's Washington.
Powell's remarks echoed those he made on Tuesday, where he saw no evidence that the labor market was likely to overheat or accelerate price pressure. He also criticized on Tuesday critics that Fed officials underestimated the prospect of inflation exceeding the target of 2% set by the central bank.
Mr. Powell added that he continued to believe that inflation would increase with the decline in unemployment, a framework known as the Phillips curve. But he acknowledged that so far wage increases have not favored price inflation and said that "it's a bit of a mystery", which is why the tight labor market has not resulted in higher salary gains.
"I would not say it's dead," he said about the Phillips curve. "It could be relaxing. We can not say it's gone. "
Mr Powell said a series of indicators such as job creation, labor market participation and the unemployment rate indicated that the labor market was moving towards full employment.
The Fed raised its key rate of federal funds last week to a range of between 2% and 2.25%. Officials tabled forecasts after their two-day meeting last week, predicting a further rate hike this year and three increases in 2019.
Fed officials predict an unemployment rate of less than 4% over the next three years, but inflation should not be expected to rise above 2%.
Powell also said he believes the US economy is "far from neutral," referring to the point where interest rates do not stimulate or slow economic growth. This is an important goal for Fed officials, some of whom have argued that the central bank should stop raising interest rates as soon as it reaches this neutral point. But Mr. Powell downplayed his ability to accurately estimate where the neutral rate lies and argued that policymakers should treat it as one of many factors guiding the interest rate policy.
President Trump, this summer, criticized the Fed's interest rate hikes on Twitter and in an interview with CNBC. During a fundraiser, he also told donors that he was not satisfied with the proceedings and cast doubt on Mr. Powell's choice to run the Fed, according to the people present.
"The tightening is now damaging to everything we have done," Trump tweeted on July 20, warning that higher rates could hamper US economic growth.
Mr Powell said on Wednesday that the Fed is making its decisions based on what is best for the economy, not political considerations.
"My goal is to control the controllable, and we control what we do at the Fed," he said about the president's tweet. He said that he had not spoken to Mr. Trump after the tweet.
Write to Kate Davidson at [email protected] and Sarah Chaney at [email protected]
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