Federal Reserve Chairman Jerome Powell says the U.S. economy is strong but could face headwinds next year as policy makers weigh how far and fast to raise interest rates, Bloomberg reports.
“We have to be thinking about how much further to raise rates, and the pace at which we will raise rates,” Powell said during a question and answer session Wednesday in Dallas moderated by Dallas Fed chief Robert Kaplan. The goal is to “extend the recovery, expansion, and to keep unemployment low, to keep inflation low.”
While generally upbeat about the U.S. economic outlook, Powell listed several potential challenges including slowing demand abroad, fading fiscal stimulus and the lagged effect on the economy of the Fed’s eight rate increases since late 2015.
The chairman’s comments highlight the growing complexity the Fed faces as it sets policy and stays on course to hike interest rates for a fourth time this year in December. The central bank’s rate increases are starting to bind on some segments of the economy such as housing, and financial conditions are tightening. But the jobs market remains red-hot and inflation is at the Fed’s 2% target.
