Federal Reserve Chair Jerome Powell appeared to signal a nearer end to the U.S. central bank’s interest-rate hikes on Wednesday, saying interest rates are now “just below” estimates of neutral less than two months after saying rates were probably “a long way” from that point.
In a speech that comes in the wake of another volatile market selloff, Powell offered few clues on how much longer the U.S. central bank would continue tightening policy but he did say the policy rate, at 2-2.25 percent, is now “just below” the broad range of estimates of neutral, which in September was 2.5-3.5 percent.
“We know that things often turn out to be quite different from even the most careful forecasts,” Powell said at an Economic Club of New York luncheon. “Our gradual pace of raising interest rates has been an exercise in balancing risks.”
The Fed has settled into a quarterly rate-hike cycle and is expected to tighten policy again next month. But signs of a slowdown overseas and nearly two months of market volatility - including a sharp selloff last week - have clouded an otherwise mostly rosy U.S. picture in which the economy is growing well above potential and unemployment is the lowest since the 1960s.
Powell said the Fed is paying “very close” attention to economic data even as it expects continued “solid” growth, low unemployment and inflation near its 2-percent target.
The Fed takes equally seriously the risks of hiking too quickly and shortening the economic expansion, and on the other hand of hiking too slowly and prompting higher inflation or financial instability, he said.