At a European Central Bank forum in Sintra, Portugal, Federal Reserve Chairman Jerome Powell said that a strong case for an additional interest rate hike is set to come later this year.
Powell said that low unemployment coupled with robust economic growth could warrant an additional rate hike–the statement comes just a week after raising the federal funds rate 25 basis points from 1.75 to 2–the second rate hike this year.
“With unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong,” Powell said.
Regarding the current, low 3.8 percent unemployment rate, Powell stated that although wage pressures remain moderate, he feels that full employment is within reach. The unemployment rate has equaled its low reached in April 2000, matching the lowest level for joblessness since 1969.
Additionally, year-over-year inflation remained below the Fed’s 2 percent target rate in April at 1.8 percent. These factors, combined with mitigated risks to the forecast, are fueling Powell’s hawkish outlook for the rest of the year.
“Earlier in the expansion, as the economy recovered, the need for highly accommodative monetary policy was clear,” said Powell. “But with unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong.”
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