Fed’s Powell: Strengthening Economic Conditions Will Continue to Drive Rate Hikes

As economic conditions continue to improve — with a robust labor market, inflation moving closer to the 2 percent target and growth exceeding most long-term estimates — the Federal Reserve expects to continue pursuing its course of gradual increases to the federal funds rate, Chairman Jerome Powell said in a speech today.  He added that “while persistently strong economic conditions can pose risks to inflation and perhaps financial stability,” it could also come with some advantages, such as more people returning to the labor force and other productivity and growth opportunities.

Powell noted the importance of ongoing monitoring of the financial system — given that positive economic conditions have previously led to overconfidence and excessive risk-taking — but said that “while some asset prices are high by historical standards, I do not see broad signs of excessive borrowing or leverage.” In addition, banks today are far better capitalized and have greater liquidity than before the financial crisis, he said.

Share.

About Author

Monica C. Meinert

Monica C. Meinert is deputy editor of the ABA Banking Journal and editorial director at the American Bankers Association, where she oversees ABA Daily Newsbytes.