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Fed Affirms Plan to Raise Interest Rates Slowly
Federal Reserve Chairman Jerome Powell affirms that the central bank plans to continue raising its overnight lending rates cautiously.
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Federal Reserve Chairman Jerome Powell affirms that the central bank plans to continue raising its overnight lending rates cautiously.
He says the Fed’s conservative policy seeks to avoid moving too fast on rates, which could shorten the country’s economic expansion, or too slowly, which might lead to excessive inflation. The bank most recently raised the rate in June by one-quarter point to 2.0%.
Powell’s comments come after President Donald Trump suggested that the bank halt further action. The Fed previously indicated its plan is to raise rates in quarter-point steps to 2.5% this year, 3.0% in 2019 and 3.5% in 2020.
The chairman says the central bank bases its action on several imprecise variable, including the “natural” unemployment rate and a “neutral” interest rate—and the determination to look beyond both for “signs of excesses.”
Powell explains the Fed’s current philosophy in medical terms. “When unsure of the potency of a medicine,” he says, “start with a somewhat smaller dose.”
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