(Bloomberg) — Here are the main points from Federal Reserve Chairman Jerome Powell’s remarks prepared for the Fed’s Economic Symposium in Kansas City on Friday:
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Powell acknowledged that the economic backdrop is now more favorable than it was a year ago. But he made it clear that the US central bank is ready to raise interest rates more if necessary, noting that a flexible economy comes with the risks of a possible acceleration of inflation.
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“In future meetings, we will assess our progress based on the totality of the data, projections and evolving risks,” Powell said. “Based on this assessment, we will tread carefully when deciding whether to further tighten monetary policy or, alternatively, to hold interest rates steady and await further data.”
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These comments are consistent with expectations that the Fed will leave rates unchanged at its September 19-20 meeting, with the possibility of raising them later in the year.
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The Fed chair noted that central bankers will be watching the data to determine their next steps, adding that strong growth and a return to strength in the labor market may require a stronger response. “Additional evidence of continued above-trend growth could put further progress in inflation at risk and could call for further monetary tightening,” he said.
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Interest rates are now high enough to be “constraining,” meaning that they affect growth and inflation. Real interest rates are “now positive and much higher than prevailing estimates of the neutral interest rate,” Powell said, adding, “We cannot say the neutral interest rate with certainty.”
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“2% is and will remain our inflation target,” the Fed chief said.
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