The Fed ‘May’ Need to Gradually Raise Interest Rates
Friday, in his 1st speech on the economic outlook since assuming the helm at the central bank on 5 February, Chairman Powell said the labor market appeared close to full employment and that inflation was poised to rebound in the coming months.
“As long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals,” Chairman Powell said at an event in Chicago.
He said the risks to the US economic outlook appeared “roughly balanced.”
The Fed Chairman made no mention of rising trade tensions between Washington and Beijing in which each government is threatening to hike tariffs on tens of billions of dollars in bi-lateral trade.
The Fed has been slowly raising rates since Y 2015, most recently in March when policymakers signaled they expected to increase borrowing costs 2 more times in Y 2018. Prices for interest rate futures have suggested that investors expect the Fed will do that.
“I will be looking for an additional pickup in wage growth as the labor market strengthens further,” he said.
He noted that Fed policymakers discussed inflation “thoroughly” in January and that he believed inflation will be influenced by the labor market over time, meaning that a tight labor market could fuel faster price gains.
Have a terrific weekend.