US Economy Experiencing “Extraordinary Times”, Outlook Strong
Tuesday, US Fed Chairman Jerome Powell said Tuesday that he sees no need to drop the central bank’s current gradual approach to raising interest rates.
Chairman Powell said the combination of steady, low inflation and very low unemployment shows the country is going through “extraordinary times.”
The Fed is trying to make sure it does not raise rates too quickly and push the country into a recession, or move too slowly and set off higher inflation, he said.
The Fed’s goal of gradual increases in interest rates is an effort to balance those risks and extend the current expansion, now the 2nd longest in US history.
Chairman Powell’s comments, delivered to the annual conference of the National Association of Business Economics (NABE), came a week after the FOMC approved a 3rd 1/4pt hike in its benchmark policy rate, pushing it to a level of 2 to 2.25%.
The Fed began gradually raising rates in December 2015 after a period of 7 years in which it kept its policy rate at a record low near Zero to try to lift the economy out of The Great Recession.
Chairman Powell noted in his speech that the unemployment rate stands near a 20-year low of 3.9%, while inflation has risen close to the Fed’s 2% target for annual increases in inflation.
The Fed’s economic forecast is in line with many others that show unemployment remaining below 4% through the end of Y 2020, with inflation staying near the 2% target over the same period, he said.
Chairman Powell was asked by a reporter at his press conference last Wednesday whether this forecast was too good to be true.
He called that “a reasonable question” given that since Y 1950, the country has never experienced such a long period of low, stable inflation and very low unemployment for such an extended period.
The current economic data support the Fed’s cautious approach in raising interest rates even as unemployment keeps moving to lows not seen in 50 years. But he said there are risks to the Fed’s current gradual approach to raising rate hikes. And that Fed policy makers are prepared quickly to change direction if conditions warrant such a change.
Right now we are look at a ‘soft landing’
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