Fed's Powell: Case for rate hike 'clearly strengthened'

Economy 11/29/2016, 7:52 PM
Fed's Powell: Case for rate hike 'clearly strengthened'

The case for an increase in federal funds rate has "clearly strengthened" since the United States Federal Reserve's last meeting in November, governor Jerome Powell said on Tuesday. He suggested the bank can afford to raise rates at its December meeting given that the economy remains "on solid footing," as evidenced by tightening labor market, while inflation is nearing the central bank's 2% target.

Speaking at an event in Washington, Powell warned that moving too slowly on raising the cost of borrowing could lead to problems if it forces the Fed to tighten monetary policy abruptly in order to avoid overshooting its goals. However, he acknowledged that the bank's patience in that regard has indeed been beneficial so far.

The rate-setter explained that despite the progress since the first half of the year, the U.S. economy still faces challenges in the medium and long term. In particular, aging population implies slower growth, and thus, in order to raise living standards, policymakers need to address productivity concerns and allow the economy to generate gains in prosperity, Powell concluded.

TeleTrader Newsroom / IB