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Federal Reserve Chairman Jerome Powell on Friday backed a “patient” approach to raising interest rates.
“The FOMC’s patient approach has paid dividends and contributed to the strong economy we have today,” Powell said, in a speech to the Economic Club of Chicago.
The Fed chairman said going slow on rate hikes has also reduced the risk of “an unforeseen blow to the economy” that might have pushed the economy into recession.
The Fed has hiked interest rates five times since December 2015, including a quarter-point move last month. The central bank has forecasts a total of three hikes for this year. Many analysts think the Fed will eventually hike four times this year, but Powell did not hint at that.
Read: Fed raises interest rates, but it’s sticking to cautious strategy for 2018
Powell said gradual rate hikes remain the best path forward.
“My FOMC colleagues and I believe that, as long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals” of 2% inflation and a strong labor market, Powell said.
“The absence of a sharper acceleration in wages suggests that the labor market is not excessively tight,” Powell said.
Read: Workers getting bigger paychecks, but wages still aren’t rising rapidly
The U.S. added a weaker-than-expected 103,000 jobs in March, and wage growth remained below 3%.
Read: Unemployment rate holds steady at 17-year low of 4.1%
Fed officials have “increased confidence” that inflation will move up toward the 2% target, he said.
Powell said incoming data could change his views on the appropriate monetary policy.
“If the outlook changes, so too will monetary policy,” he said.
During a moderated question-and-answer discussion after his speech, Powell said it was too soon to get a handle on how tariffs from a trade fight with China might effect the economy.
Stocks hit fresh lows after Powell’s speech was released. The Dow Jones Industrial Average DJIA, -2.55% was down over 500 points as Trump proposed fresh tariffs against China.
“The discussion about tariffs is at a relatively early stage. We don’t know the extent to which the tariffs come into effect. It is too early to say,” he said. In general, “tariffs can push up on prices,” Powell said.
Powell did not address the volatile moves in the stock market.
The Fed chairman defended the Dodd-Frank rules for the nation’s biggest banks put in place in the wake of the financial crisis.
“As you look around the world, U.S. banks are competing very, very successfully. I’m looking...for some kind of evidence that regulation is holding them back. I’m not seeing that case as made,” he said.