Jerome Powell: Fed to keep raising benchmark interest rate

Marco Green
November 18, 2018

Those include a slowdown in global growth, the fading impact from tax cuts and the cumulative weight of the Fed's own interest rate hikes. Last week, the Fed left rates unchanged at the conclusion of the two-day meeting, but noted that the central bank remained on track to gradually raise interest rates. The campaign, though, has attracted the ire of President Donald Trump, who's attacked the Fed for raising rates.

"We are absolutely committed to serving the public in a non-partisan, professional way, in a way that communicates what we're doing and why we're doing it as clearly as possible" Powell said.

"We have to be thinking about how much further to raise rates, and the pace at which we will raise rates", Mr Powell said during a question and answers session Wednesday in Dallas moderated by Dallas Fed chief Robert Kaplan.

"Slowing growth overseas. The tax cuts and spending increases that were enacted are providing some real boost right now, but that impetus is going to wear off over time", Powell said when asked to list the "headwinds" the economy may face in coming months.

But he also cautioned that every time the Federal Open Market Committee meets from now on, there's the possibility of additional - but gradual - short-term interest rate hikes.

That did not alter the Fed's outlook much, and policymakers at their meeting last week said economic growth continued "at a strong rate". But the jobs market remains red-hot and inflation is at the Fed's 2 percent target.

The Fed's goals of both maximum sustainable employment and stable inflation are set by Congress and not to be part of the review.

"We have an important job that Congress has assigned. It is rates as well", with the costs of home mortgages rising, Powell said. He also noted expectations that the strong support the US economy has received from the $1.5 trillion tax cut Trump pushed through Congress last December and a big boost in government spending will fade.

As a result of the accumulating fiscal deficit, the United States will have to sell more bonds to investors and other countries, creating what Dalio said will be a supply-demand problem for the bond market "that will particularly come next year or the year after". It also began publishing individual policymakers' anonymous forecasts for future rate hikes and key economic metrics.

At another point, he was asked about the old Wall Street adage that bull markets don't die of old age but rather get killed by the Federal Reserve.

"None of these alternative frameworks are without challenges, but all are worth thorough review", Cleveland Fed President Loretta Mester said in an October speech in NY.

Other reports by Click Lancashire

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