The Federal Reserve will continue to raise interest rates at a gradual pace in order to extend the economic recovery while keeping inflation in check, Chairman Jerome Powell said.
“The practical way we can navigate between moving too fast and moving too slow is to move gradually,” Powell said Wednesday at an event in Washington hosted by The Atlantic magazine and the Aspen Institute. He said the Fed may move interest rates above the so-called neutral level that neither stokes nor slows growth.
“Interest rates are still accommodative, but we’re gradually moving to a place where they’ll be neutral — not that they’ll be restraining the economy,” he said. “We may go past neutral. But we’re a long way from neutral at this point, probably.”
Powell repeated his upbeat assessment of the economy a day after drawing attention to the “extraordinary times” the U.S. is experiencing with low, steady inflation alongside very low unemployment.
The U.S. is experiencing “a remarkably positive set of economic circumstances, and we’re working hard to try to sustain the expansion and keep unemployment low and keep inflation right on target,” he said Wednesday. “There’s really no reason to think that this cycle can’t continue for quite some time.”
Several other Fed officials spoke earlier Wednesday, each offering support for additional interest-rate increases, though differing on the need for another hike this year.
Cleveland Fed chief Loretta Mester said she supported a gradual pace of hiking, though the speed will depend on inflation and employment levels. “If we end up having inflation move high up” or if it goes too much above target, “then we need to move policy faster,” she said.
