Federal Reserve Chairman Jerome Powell, pledging to “strike a balance” between the risk of an overheating economy and the need to keep growth on track, told U.S. lawmakers on Monday (Feb. 26) that the central bank would stick with gradual interest rate increases despite the added stimulus of tax cuts and government spending.
Reuters reported that Fed policymakers anticipate three rate increases this year, and Powell gave no indication in prepared remarks to the House Financial Services Committee that the pace needs to quicken even as the “tailwinds” of government stimulus and a stronger world economy propel the U.S. recovery.
“The [Federal Open Market Committee] will continue to strike a balance between avoiding an overheating economy and bringing … price inflation to 2% on a sustained basis,” Powell said in his first monetary policy testimony to Congress as Fed chief.
“Some of the headwinds the U.S. economy faced in previous years have turned into tailwinds,” Powell said, noting recent fiscal policy shifts and the global economic recovery. Still, “inflation remains below our 2% longer-run objective. In the (FOMC’s) view, further gradual rate increases in the federal funds rate will best promote attainment of both of our objectives.”
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