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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

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