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The Economy is ‘Considerably Stronger’ Says Powell

On Tuesday, Jerome Powell, Chairman of the Federal Reserve said that a strong economy and stable inflation justified a gradual rate increase in 2018. His remarks were made during his semiannual testimony to before the Senate Committee on Banking, Housing, and Urban Affairs.

Making a case for gradual interest rate increases, Powell said that with appropriate monetary policy, “the job market will remain strong and inflation will stay near 2 percent over the next several years.”

He outlined four factors to back-up his outlook on interest rate hikes. “First, interest rates, and financial conditions more broadly, remain favorable to growth. Second, our financial system is much stronger than before the crisis and is in a good position to meet the credit needs of households and businesses,” Powell said. “Third, federal tax and spending policies likely will continue to support the expansion. And, fourth, the outlook for economic growth abroad remains solid despite greater uncertainties in several parts of the world.”

Giving his outlook on the economy, Powell said that alongside the strong job market, the U.S. economy had grown at a solid pace so far this year and the growth was based on several factors.

“Robust job gains, rising after-tax incomes, and optimism among households have lifted consumer spending in recent months. Investment by businesses has continued to grow at a healthy rate. Good economic performance in other countries has supported U.S. exports and manufacturing,” Powell said. “And while housing construction has not increased this year, it is up noticeably from where it stood a few years ago.”

In his opening remarks before the hearing, Senator Mike Crapo, Chairman of the Banking Committee touched upon his expectation from the Fed on the provisions passed under S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act.

“A key provision of the bill provides immediate relief from enhanced prudential standards to banks with $100 billion in total assets or less,” Crapo said. “The bill also authorizes the Fed to provide immediate relief from enhanced prudential standards to banks with between $100 billion and $250 billion in assets. It is my hope that the Fed promptly provides relief to those within those thresholds.”

When asked about the impact of tariffs during his testimony, Powell said, “In general countries that have remained open to trade, that haven’t erected barriers including tariffs, have grown faster, they have higher incomes, higher productivity. Countries that have gone in a more protectionist direction have done worse.”

Learn more about what the Fed Chair said about the economy and monetary policy in February:

Powell Doubles Down on “Further Gradual” Interest Rate Hikes

About Author: Radhika Ojha

Radhika Ojha is an independent writer and copy-editor, and a reporter for DS News. She is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her masters degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha, also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas.
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