Powell says outlook strengthened by tax reform; won’t commit on rate hikes
Federal Reserve Board Chairman Jerome Powell refused to comment on his views on the number of times the Federal Open Market Committee will raise rates this year, although he admitted his “outlook has strengthened since December.”
Responding to a question, Powell told the House Financial Services Committee, new projections will be forthcoming from the Fed after its meeting in three weeks and he “wouldn’t want to prejudge that assessment,” although he noted his view of the economic outlook was stronger following tax reform and the budget deal.
As for quantitative easing, Powell responded that he believed it was “effective” and the asset purchases “did their job.”
Asked about the vacancies on the Fed Board, Powell said, he and his colleagues are “eager” to have at least some of the four open seats filled.
On tax reform’s effects, Powell replied, he expects “a meaningful increment to demand,” adding he expects “wages to increase this year.”
When asked about the voting rotation of the FOMC, Powell said he thinks it works well and the structure of the FOMC isn’t “broken.” He added, members having a persuasive argument is more important than whether they have a vote that year.
In prepared text, the Fed chair called for continued gradual rate hikes, which he said would promote the Fed’s dual mandate — price stability and maximum employment.
“In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2%,’’ Powell said in the prepared text.
Regarding the economy, he said, “Some of the headwinds the U.S. economy faced in previous years have turned into tailwinds. Fiscal policy has become more stimulative and foreign demand for U.S. exports is on a firmer trajectory.’’