Washington, Feb 28 (IANS) US Federal Reserve Chairman Jerome Powell told the lawmakers on Tuesday that the central bank would continue to gradually raise interest rates.
“The US economy grew at a solid pace over the second half of 2017 and into this year,” Xinhua quoted Powell as saying to the House Financial Services Committee.
Fed officials expect three interest rate hikes this year due to strong momentum in economic expansion, according to the semi-annual Monetary Policy Report to the Congress released by the Fed last week.
Powell told lawmakers in his first monetary policy testimony that “gradually reducing monetary policy accommodation will sustain a strong labor market while fostering a return of inflation to two per cent.”
Monthly job gains averaged 179,000 from July through December 2017 and payrolls rose an additional 20,000 in January, according to the Bureau of Labor Statistics.
“This pace of job growth was sufficient to push the unemployment rate down to 4.1 per cent, about 0.75 percentage point lower than a year earlier and the lowest level since December 2000,” said Powell.
Against the backdrop of solid growth and a strong labour market, inflation has been low and stable.
The personal consumption expenditures (PCE) price index, an inflation index favored by the Fed, increased 1.7 per cent in the 12 months ending in December.
“We continue to view some of the shortfall in inflation last year as likely reflecting transitory influences that we do not expect will repeat,” Powell said.
According to the minutes for Fed’s policy meeting on January 30 and 31, Fed officials have become more confident about the growth and inflation outlook.
The Fed is expected to raise interest rates for the first time this year at the next policy meeting in March.
Powell also mentioned the potential impact of Trump administration’s fiscal policies on Fed’s monetary policy. He told lawmakers that “some of the headwinds the US economy faced in previous years have turned into tailwinds.”