Powell's gradual rate hikes remain unchanged and will keep inflation close to the target!

2018-07-18      www.fxcgcn.com   
Federal Reserve Chairman Powell on Tuesday(7month17day)In the context of a strong labor market in the United States, the Federal Reserve has reiterated its intention to gradually raise interest rates to keep inflation close to its target.
The Federal Open Market Committee believes that the best approach currently is to continue gradually increasing the federal funds rate. Powell stated in his speech that we are aware that, on the one hand, raising interest rates too slowly may lead to high inflation or uncontrolled financial markets; On the other hand, if we raise interest rates too quickly, the economy may weaken and inflation may continue to fall below our target.
Powell downplayed the risk that a trade war could derail the global recovery, stating that as long as monetary policy is appropriate, the job market will remain strong in the coming years and inflation will remain at2%Nearby. This is one of the most resolute statements made by the Federal Reserve in the past decade after the United States experienced a severe financial crisis and economic recession, towards achieving its dual policy goals.

In his written testimony to the Senate Finance Committee on Tuesday, Powell hinted that he not only believed in the good functioning of the economy, but also believed that as long as the Federal Reserve made the right policy decisions, the period of stable economic growth could continue.
Powell stated that the Federal Reserve believes that the best way forward currently is to continue to gradually raise the federal funds rate, so that the pace of rate hikes is consistent with the speed of economic growth, without raising rates too fast or too high, which will harm growth. Powell did not mention the appropriate pace of tightening policies he believed, or did he believe, as some of his colleagues pointed out, that if inflation remains under control, the Federal Reserve should pause the interest rate hike cycle at some point next year. The Federal Reserve is expected to raise interest rates twice this year, and the current target range for the federal funds rate is1.75-2%。
In recent speeches, Powell and some other Federal Reserve officials flatly refused to declare its implementation2%Efforts to achieve inflation targets have "won", but most decision-makers acknowledge that the employment target has been achieved due to the unemployment rate being at4%The low order of.
Powell pointed out that inflation is "close to" the Federal Reserve's target and "recent data is encouraging," citing the reasons why he believes the United States' expansion momentum will continue in the past decade. Powell stated that interest rates remain low, the financial system is stable, global growth continues, and recent tax cuts and increased federal spending "continue to support economic expansion.
Powell also acknowledged that the uncertainty surrounding the Trump administration's trade policies has led to a decrease in demand and disrupted the supply chains of global enterprises. such asIMFInternational organizations have warned that if the United States' round after round of tariff actions and retaliatory measures from other countries lead to price increases, it may curb global growth.
Powell also warned that it is difficult to predict how trade tensions and the scale and timing of the economic effects of recent fiscal policy changes will affect the economic outlook. He stated that the risks of economic weakness or strength are "roughly balanced". The most likely path for economic development is sustained employment growth, moderate inflation, and stable growth.