REPEAT: MNI POLICY: Fed's Powell: Gradual Hikes Best Way Ahead

Repeats Story Initially Transmitted at 14:00 GMT Jul 17

--5 Things We Learned From Fed Chair Powell's Testimony

By Sara Haire and Kevin Kastner

     WASHINGTON (MNI) - The following are the key points from the testimony of

Federal Reserve Governor Jerome Powell's testimony to the Senate Banking

Committee Tuesday:

     - Chairman Powell's testimony was generally upbeat, noting inflation has

now reached the 2% target and is expected to stay near there for the next

several years with appropriate policy. He also noted that GDP growth is seen

accelerating in the second quarter, that the unemployment rate dipped to 4% and

is expected to move lower, and that risks are still "roughly balanced". As a

result, Powell said "the FOMC believes--for now--the best way forward is to keep

gradually raising the federal funds rate."

     - Powell noted that inflation has reached the 2% objective, the challenge

is to keep it there, saying it will be above 2% at some times and below 2% at

other times. Powell said the 2% target is symmetric "because the FOMC would be

concerned if inflation was running persistently above or below our objective."

     - Powell noted that GDP growth is expected to be "considerably stronger" in

the second quarter than in the first quarter. He explained that "federal tax and

spending policies likely will continue to support the expansion." However, he

did caution that it is "difficult to predict" the size and timing of the

economic effects of the recent changes in fiscal policy.

     - Powell made no mention of the yield curve and said it is "difficult to

predict the ultimate outcome of current discussions over trade policy." He noted

that "the outlook for economic growth abroad remains solid despite greater

uncertainties in several parts of the world." He added that "good economic

performance in other countries has supported U.S. exports and manufacturing."

     - Powell said that wages are growing "a little faster" than they did in

recent years, but not as fast as before the crisis, perhaps due to low

productivity growth. But he said that "on a brighter note, moderate wage growth

also tells us that the job market is not causing high inflation." 

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com