NEW YORK: The Federal Reserve is set to gradually raise interest rates as long as the US economy continues on its current path, an influential Fed governor said on Wednesday.
In a speech that shed little light on whether the US central bank would move as soon as next month to tighten policy, Governor Jerome Powell said the Fed was wise to have been patient in recent years.
"But risks now seem to me to be more in balance. Going forward, I see it as appropriate to gradually tighten policy as long as the economy continues to behave roughly as expected," Powell, a permanent voter on Fed policy who is seen as a centrist, told the Forecasters Club of New York.
Powell, who stressed the need for fiscal policies that encourage Americans to participate in the labor market and that invest in infrastructure, said the US economy is nonetheless headed in the right direction after years of recovery from recession.
He expects growth to continue at the roughly 2-percent pace currently, and inflation to reach a 2-percent Fed target over the next couple of years. Joblessness should fall a bit further while the labor market should continue to tighten, he predicted.
"We appear to be close to our employment objective, and are nearing our inflation objective," Powell said. "While the pace of progress has at times been frustratingly slow, this outcome is a better one than that achieved by most other advanced economies."
The Fed has raised rates once in each of the last two years in a tentative sign of optimism on the economy.
But policymakers expect to pick up the pace of hikes this year as unemployment, down to 4.8 percent, is expected to boost inflation and as President Donald Trump and the Republican-controlled Congress are expected to cut taxes and boost spending. Median forecasts from December suggest they see roughly three rate hikes in 2017.
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