His testimony comes at a critical juncture on the way to the economy as the global economy strengthens and Trump's $ 1.5 trillion tax cuts add economic value to the United States.
Investors are eagerly waiting to hear how the Fed will respond under Mr. Powell's leadership and whether it will seek to raise interest rates faster than expected. In his testimony, Mr. Powell tried to reassure the markets that he believes, at least at the moment, that the Fed's current path is the right one.
In early February, data on wage increases ̵
In his remarks, Mr. Powell downplayed concerns about market volatility and said that financial conditions have tightened somewhat, but not so tightly to impede growth. And he also pointed out that he sees the stronger news as a reason to implement their plans for incremental rate hikes rather than as a reason to raise rates more quickly. Most Fed officials predicted in December that the Fed would raise interest rates three times in 2018, as it did last year.
Mr. Powell has taken control of the central bank at a time when the economy is nearing the end of its ninth year of expansion and the Fed has steadily raised its interest rate to a more normal level after being lowered to near zero to stimulate it (19659006) These rate hikes are designed to prevent the economy from getting too hot while giving the Fed the opportunity to fight a future recession by lowering interest rates again.
Investors around the world expect the Federal Reserve to raise its key interest rate to a range of 1.5 percent to 1.75 percent in March, with some expecting another quarter of an extra point in June.
The US Federal Reserve has forecasted three such increases in 2018. However, some investors believe that the central bank may raise rates four times this year, especially if the Trump government's January tax cut causes an unexpectedly sharp rise in the economy and inflation.
Although a strong economy and low unemployment typically drive inflation, it has remained puzzlingly low in recent years. Mr. Powell acknowledged the trend, but said that he believed that sluggish price increases were partly due to temporary factors and that inflation would gradually increase this year.
Investors are paying close attention to signs that inflation may rise faster than previously expected – an indication that the Fed may need to raise interest rates faster than planned and slow down economic growth.
Fed presidents must appear twice before Congress to discuss central bank operations. During his testimony this week, Mr. Powell is likely to be appalled by his plans to set interest rates, reduce Fed balance sheets, and relax rules for banks. Powell, a former investor and member of the Federal Reserve's Governing Council under Mrs. Yellen, was sworn in as the 16th Chairman of the Federal Reserve on February 5, where he was instructed to set the key interest rate that would accelerate or slow down economic activity.  He took office at a time when the Fed's Board of Governors consists of only three instead of seven members. He joins Lael Brainard, a candidate of the Obama administration, and Randal K. Quarles, who has selected the Trump administration as Vice Chairman for Supervision, a position where he supervises banking regulation. Another Trump candidate, the economist Marvin Goodfriend, seems to be held from unexpected rejection of his nomination.
On Monday, Mr. Quarles also painted an optimistic picture of the economy, saying he was cautiously optimistic that economic growth would accelerate
"The factors that have slowed growth do not have to be permanent and could even become quite fast "Mr. Quarles said in a speech to the National Association for Business Economics.
He recently pointed to stimulus packages, including the tax cut that took effect in January, and stronger global growth as reasons for optimism.
"There are signs that we have a sustainably stronger economy," said Mr. Quarles. "It's a bit too early to call that, but there are clear signs that it could happen."
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