Powell Doctrine emerges as Fed chief debuts at Jackson Hole

Speaking on Friday at an annual economic symposium in Jackson Hole, Wyoming, Powell said the central bank faces two major risks - "moving too fast and needlessly shortening the expansion, versus moving too slowly and risking a destabilizing overheating", Xinhua reported.

". if the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate", he added.

Powell said in his Jackson Hole speech: "The economy is strong".

The Fed has penciled in two more interest rate hikes this year despite risks from trade conflicts and emerging market turmoil.

Powell's speech discussed at length the challenges of monetary policy at a time when economic benchmarks - such as estimates of full employment or the neutral policy rate - are uncertain. The Fed is widely expected to resume doing so at its next policy meeting late next month.

Dallas Fed President Robert Kaplan also said Trump's comments would not affect the central bank's decision making.

The Fed should raise rates further this year and probably next year as well, despite Trump's opposition to tighter policy, Kansas City Fed President Esther George had said in an interview aired on Thursday.

Markets are pricing in two more rate hikes this year, and one next year, less than the three rate hikes the Fed now forecasts for 2019.

Increasing consensus on the need to continue raising USA interest rates was on display at the start of the global central bankers meeting, as the longstanding distinction between so-called policy hawks, centrists and doves blurs in the face of falling unemployment.

The Federal Reserve chairman has defended the central bank's approach of gradually raising interest rates, after direct criticism from Donald Trump.

His words reinforcing the Fed's plan to gradually raise rates seemed to have reassured investors. The rate is now at a range of 1.75 percent to 2 percent, well above the near-zero level the Fed kept it at from late 2008 to 2015 but still historically low.

He said prices were rising at about the Fed's target pace of two percent, signaling the United States central bank does not expect to accelerate interest rate increases as some investors have feared.

"Over time, inflation has become much less responsive to changes in resource utilization", Powell said.

Following Powell's Friday morning speech, the Dow soared 120 points and the S&P closed at a record high. "Inflation is near our two per cent objective and most people who want a job are finding one".

"Any comments on current Fed policy will draw even more than the usual attention given recent and unprecedented criticism of the Fed by President Trump", Larry Hatheway, chief economist at GAM Investments, told Bloomberg News. The rate hikes are meant to prevent the economy from overheating and inflation from accelerating.

Trump believes that rate hikes would hinder economic growth and put a cap on the bullish USA stock market. In his view, that's why the Fed can continue with a gradual pace of rate hikes that began under Yellen.

Asked at the time another bout of Trump critiques, Powell said "no one in the administration has said anything to me that really gives me concern on this front".

  • Wendy Palmer