Fed’s Powell: Gradual rate hikes likely despite trade fights

 

Federal Reserve Chairman Jerome Powell said Tuesday the central bank plans to continue raising interest rates gradually amid a solidly growing economy and rising inflation, largely downplaying the effects of escalating U.S. trade skirmishes with other countries.

“With a strong job market, inflation close to our objective, and the risk to the outlook roughly balanced, the (Fed) believes that – for now – the best way forward is to keep gradually raise the federal funds rate,” Powell told the Senate banking committee in his semiannual report to Congress.

At the same time, Powell noted that “the economic outcomes we experience often turn out to be a good deal stronger or weaker than our best forecast. For example, it is difficult to predict the ultimate outcome of current discussions over trade policy as well as the size and timing of the economic effects” of Congress’s sweeping tax cuts and spending increases, which have juiced growth.

President Trump threatened last week $200 billion in tariffs on Chinese imports, adding to $34 billion in tariffs on Chinese goods and sweeping steel and aluminum tariffs. China, the European Union and Canada have threatened countertariffs, and many economists believe the widening battles could noticeably dinge economic growth by pushing up domestic consumer prices and hurting exports, as well as stoking business uncertainty.

In June, Fed policymakers forecast a total of four hikes this year, up from there estimate of three in March.

Powell on Tuesday cited a “robust” labor market, noting an average 215,000 jobs a month have been added so far this year, up from 2017. He also said the Fed’s preferred inflation measure — which strips out volatile food and energy items – has reached its 2% annual target.

 

 

Read More at USA TODAY