Powell says Fed expects to stick with gradual rate hikes

CHICAGO — Federal Reserve Chairman Jerome Powell on Friday painted a mostly sunny view of the U.S. economy and said the Fed remains committed to raising its key interest rate gradually.

In his first speech as Fed leader, Powell noted that the central bank raised its key rate by a quarter-point at its March meeting, just the sixth increase since late 2015. He depicted that rate hike as “another step in the ongoing process of gradually scaling back” the ultra-low rates it employed to lift the economy out of the Great Recession.

In remarks to the Economic Club of Chicago, Powell said this “patient approach has paid dividends and contributed to the strong economy we have today.” He said the Fed will continue to balance the risks of moving too slowly in raising rates or moving too quickly.

Powell, who was tapped by President Donald Trump to succeed Janet Yellen as Fed leader, took over on Feb. 5. He presided over his first Fed meeting last month when the central bank boosted its key rate to a still-low level of 1.5 percent to 1.75 percent.

At the March meeting, the Fed signaled that it expected to raise rates a total of three times this year, matching the number of rate hikes it approved in 2017.

Many private economists believe that the economic stimulus stemming from the $1.5 trillion in tax cuts approved in December and increased government spending approved in February will ultimately prompt the Fed to raise rates at a slightly faster pace of four hikes instead of three this year.

But Powell did not give any indication Friday that the central bank felt a need to accelerate its pace of rate hikes. He stressed that if economic conditions changed, the Fed would be ready to respond to those changes.

“As long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals,” Powell said, noting that the central bank seeks to pursue policies to achieve maximum employment and stable prices, which it defines as inflation rising at 2 percent.