Fed head Jerome Powell supports a cautious path on tariffs



Fed Chairman Jay PowellImage copyright
AFP

The "consensus vision" at the US Federal Reserve is that gradual interest rate rises remain the best policy, said the head of the US central bank.

The President of the Federal Reserve Jerome "Jay" Powell made the remarks at an annual economic conference in Wyoming.

He said that the difficulties in interpreting data suggest the wisdom of a conservative approach.

He added, however, that policymakers will act resolutely in a crisis.

"I am convinced that the [Fed] would resolutely "do what is necessary", "he said, according to a copy of the speech at the Jackson Hole symposium.

The Federal Reserve has been increasing interest rates since 2015, including two increases so far this year.

Analysts expect one or two additional rate hikes, the next of which is expected at the September meeting of the bank.

& # 39; Smaller dose & # 39;

Some analysts worry that the bank is moving too slowly, referring to the unemployment rate that has dropped to near lows. Others warn that their actions risk becoming too aggressive, indicating a relatively weak price inflation to date.

US President Donald Trump, who has appointed Mr. Powell as Chairman, is one of those who have raised the rising trend, which he believes will dampen economic activity and drive the dollar, which will damage exports.

But Mr. Powell said that he saw the slow and steady approach to Fed rate hikes as the best way to avoid both risks.

"If you are not sure about the effects of your actions, you have to act conservatively," he said. "In other words, if you are not sure about the potential of a drug, start with a smaller dose."

  • A new man takes over the Fed: what will he do?
  • What happens in Jackson Hole?

Mr. Powell said the bank had a responsibility to set expectations about inflation.

It is also important that officials take into account data that goes beyond unemployment and inflation, including foam on the financial markets, he added.

"In the run-up to the past two recessions, destabilizing excesses arose mainly in financial markets rather than in inflation," he noted. "For example, risk management suggests looking beyond inflation for signs of excesses."

In his remarks, Mr. Powell said that the US economy – which grew at an annual rate of 4.1% in the most recent quarter – is strong and does not appear at an "increased" risk of overheating.

Many of the key challenges facing the US economy – such as slow wage growth and rising government debt – remain outside the Fed's powers to address, he added.


Source link

Leave a Reply