WASHINGTON: The Federal Reserve will continue to raise rates gradually as the economic outlook remains strong despite uncertainty over trade policy, Fed Chairman Jerome Powell said Tuesday.
Powell was upbeat about the US economy, noting that job creation remained strong and inflation was right around the Fed's two percent target, reports AFP.In addition the recent tax cut, strong business investment is fueling consumer spending and business investment remains strong, he said in his semi-annual testimony to the Senate Finance Committee.
However, he acknowledged that it was "difficult to predict the ultimate outcome of current discussions over trade policy," a clear reference to the aggressive tariff policies adopted by President Donald Trump against China and many US trading partners.
The International Monetary Fund warned Monday escalating trade tensions and tariff threats, if carried out, could disrupt global growth and derail investments.
Still, Powell said the Fed's interest rate-setting Federal Open Market Committee was satisfied with the central bank's efforts to get monetary policy back to normal by raising rates and reducing the size of investments accumulated in the wake of the 2008 financial crisis.
"With a strong job market, inflation close to our objective and the risks to the outlook roughly balanced, the FOMC believes that -- for now -- the best way forward is to keep gradually raising the federal funds rate," Powell said in his prepared testimony.
The FOMC increased the benchmark lending rate by a quarter percentage point in March and June, and most economists expect two more rate hikes this year.