The Federal Reserve will continue its inflation target of 2% over the next few years, with further gradual increases in interest rates aimed at sustaining economic expansion and a strong labor market, the chairman of the central bank’s board said Friday.
Speaking to the Economic Club of Chicago, Federal Reserve Board Chairman Jerome H. “Jay” Powell said he and his colleagues on the Fed’s interest-rate setting Open Market Committee (FOMC) believe that approach, as long as the economy continues broadly on its current path, will best promote a growing economy and jobs.
“It remains the case that raising rates too slowly would make it necessary for monetary policy to tighten abruptly down the road, which could jeopardize the economic expansion,” Powell said. “But raising rates too quickly would increase the risk that inflation would remain persistently below our 2 percent objective. Our path of gradual rate increases is intended to balance these two risks.”
Powell added that the Fed’s views about “appropriate monetary policy” in the months and years ahead will hinge on incoming economic data and an evolving outlook.
“If the outlook changes, so too will monetary policy. Our overarching objective will remain the same: fostering a strong economy for all Americans–one that provides plentiful jobs and low and stable inflation,” he said.