Powell reaffirms gradual-rate-hike approach in Jackson Hole speech

by Francis Monfort28 Aug 2018

The Federal Reserve will likely stay on the path of gradual interest rate increases as it focuses on balancing the promotion of economic growth and the control of excesses, according to Chairman Jerome Powell.

"I see the current path of gradually raising interest rates as the [Federal Open Market Committee's] approach to taking seriously both of these risks," Powell said at the Fed’s annual retreat at Jackson Hole, Wyo.

Powell also said current conditions warrant the gradual approach, adding that he does not see inflation getting out of hand, CNBC reported.

"As the most recent FOMC statement indicates, if the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate," Powell said.

If there are no significant changes to economic trends, the Fed will likely remain on its current trajectory, which began in December 2015. Since then, the FOMC has approved seven quarter-point rate increases, bringing the current target for the benchmark funds rate to 1.75% to 2%.

"The economy is strong. Inflation is near our 2% objective, and most people who want a job are finding one," Powell said. "My colleagues and I 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%."

Powell did not talk about criticisms leveled by President Donald Trump against the Fed for continuing rate increases. CNBC reported that other Fed officials said they remain committed to keeping the agency’s independence from political pressures.

However, the Fed chair did refer to conditions in emerging markets. "There are risk factors abroad and at home that, in time, could demand a different policy response," Powell said.