WASHINGTON – Federal Reserve Chairman Jerome Powell had a smooth public debut in his new job as head of the nation’s central bank. But investors want to know whether he is really as optimistic about economic prospects as he appeared to be.
Powell’s optimism in testimony before a House committee on Tuesday sparked a two-day sell-off on Wall Street as worries increased that the Fed may accelerate the pace of its interest rate hikes.
Powell delivered the second day of congressional testimony Thursday before the Senate Banking Committee. His prepared testimony was identical to the comments he gave Tuesday.
Before his appearance, the government reported that a key inflation measure favored by the Fed rose by just 1.7 percent in the 12 months ending in January, still well below the Fed’s 2 percent target.
Powell, who has been on the Fed board since 2012, took over as Fed chairman on Feb. 5, succeeding Janet Yellen.
The Fed raised rates three times in 2017 with the last hike coming in December. At that meeting, the central bank projected that it would raise rates another three times this year.
However, that projections came before Congress passed a $1.5 trillion tax cut in late December and a boost of $300 billion in domestic and military spending as part of a budget deal reached in January.
All that stimulus is expected to bolster economic growth this year and next year. Investors are watching to see if that extra fiscal boost will prompt the Fed to accelerate its rate hikes to possibly four increases this year out of concerns that inflation could begin to rise at worrisome rates.
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