Federal Reserve Chairman Jerome Powell said the outlook for inflation and the U.S. labor market support further gradual interest-rate increases while the lack of a spike in wage gains shows the labor market is “not excessively tight.”
“We will continue to aim for 2 percent inflation and for a sustained economic expansion with a strong labor market,” Powell said Friday in his first speech since becoming chairman in February. “As long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals,” he told the The Economic Club of Chicago.
Powell’s comments hewed closely to remarks he made to reporters last month that emphasized the stronger U.S. economic outlook after the Fed raised interest rates and signaled at least two more moves in 2018.
U.S. financial markets have been roiled since his March 21 press conference by a simmering trade dispute between the U.S. and China. The S&P 500 Index is down around 8 percent from its January peak. On the other hand, policy makers forecast solid growth this year aided by Republican tax cuts, and job growth remains steady.
Powell discussed the labor market and inflation trends in some detail, but did not discuss trade in his prepared remarks. He said reports from the labor market were mixed with some indicators showing tightness and others showing slack.
“The absence of a sharper acceleration in wages suggests that the labor market is not excessively tight,” Powell said. “I will be looking for an additional pickup in wage growth as the labor market strengthens further.”
Employers added 103,000 new workers in March, Labor Department data earlier on Friday showed, while unemployment held at 4.1 percent. Inflation, measured by the central bank’s preferred gauge, rose 1.8 percent in the 12 months through February and has been below the Fed’s 2 percent target for most of the last six years.
