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BUSINESS Saturday 14 July 2018
A25

Federal Reserve projects further gradual hikes in key rate

By MARTIN CRUTSINGER a period of turbulence in fi-
Associated Press nancial markets earlier this
WASHINGTON (AP) — The year.
Federal Reserve said Friday In his interview with the
it expects low unemploy- radio program "Market-
ment and rising inflation place" on Thursday, Powell
will keep it on track to raise said that Fed officials have
interest rates at a gradual been hearing a "rising level
pace over the next two of concern" from business
years. By late 2019, the executives following the
Fed says its key policy rate tough talk from the Trump
should be at a level that administration, which has
will be slightly restrictive for imposed penalty tariffs on
growth. a number of countries in an
The Fed's projection on rate effort to open markets for
hikes came with release of U.S. goods.
the central bank's semi- The effort has provoked
annual monetary report to retaliation, and now the
Congress. Fed Chairman world's two biggest econo-
Jerome Powell is scheduled mies, the United States and
to testify on the report for China, are in a full-blown
two days next week. trade war.
The Fed last month raised In the interview, Powell
its policy rate for a second In this June 13, 2018, file photo, Federal Reserve Chair Jerome Powell speaks to the media after said he was "very pleased
time this year and project- the Federal Open Market Committee meeting in Washington. with the results" of the Fed's
ed two more hikes in 2018. Associated Press gradual pace of rate hikes.
The monetary report says median projection for the The Fed's interest rate has place" at the moment with "We're returning rates to a
the expectation is that fur- funds rate has it rising to 2.4 not been restrictive for over unemployment at the low- more normal level," Powell
ther hikes will leave the rate percent by the end of this a decade. In response to est point in nearly two de- said.
slightly above its neutral year, which would indicate the 2008 financial crisis, the cades and inflation finally "If we leave rates too low
level by late next year. two more rate hikes are up- Fed cut its policy rate to approaching the Fed's op- for too long, then we can
The Fed's current projec- coming in 2018, and then a record low near zero in timal goal of 2 percent an- have too high inflation or
tion for the neutral rate — climbing to 3.1 percent by December 2008 and kept nual increases. we can have asset bubbles
the point where monetary the end of 2019 and 3.4 it there for seven years. It In the monetary policy re- or housing bubbles. If we
policy is not stimulating percent by the end of 2020. boosted rates by a mod- port, the Fed said that it move too quickly, then we
growth or restraining it — is That forecast would mean est quarter-point in both expects "a gradual ap- can unintentionally put the
2.9 percent. With the June that the Fed's interest rates 2015 and 2016 and then proach to increasing the economy into a recession."
rate hike, the current range would cross a major mile- raised rates by three times target range for the federal Powell was tapped by
for the policy rate, known stone next year toward a last year as the economic funds rate will be consistent President Donald Trump to
as the federal funds rate, is point where Fed interest recovery finally began to with a sustained expan- succeed Janet Yellen in
1.75 percent to 2 percent. rates are no longer being gain momentum. sion of economic activity, February as Fed chairman
The policy report says that kept low to boost econom- Powell, who will testify next strong labor market condi- after Trump decided not to
officials' median outlook for ic growth and will instead Tuesday before the Senate tions and inflation near the offer Yellen a second term.
the future course of interest begin to slightly restrain Banking Committee and on committee's symmetric 2 Trump during the cam-
rates would put the policy growth in an effort to make Wednesday to the House percent objective over the paign was highly critical of
rate "somewhat above" the sure that low unemploy- Financial Services Commit- medium term." the Federal Reserve, ac-
neutral rate by the end of ment does not cause the tee, said in an interview this The monetary report noted cusing officials of keeping
2019 and through 2020. economy to overheat and week that he believed "the that worries about rising rates at ultra-low levels to
The report noted that the trigger rising inflation. economy's in a really good trade tensions had caused favor Democrats.q
Stock indexes move higher

on Wall Street

Associated Press with earnings reports from market heads for a second
NEW YORK (AP) — Stocks major banks. Wells Fargo, straight week of healthy
are moving higher in mid- which has been plagued gains.
day trading on Wall Street, by investigations into fake Industrial and energy com-
having shaken off an early accounts, lost 2.3 percent panies rose more than the
wobble, as the market after reporting a drop in rest of the market Friday.
heads for a second straight earnings. The S&P 500 index Boeing climbed 1.1 per-
week of healthy gains. In- rose 3 points, or 0.1 per- cent and Devon Energy
dustrial and energy com- cent, to 2,801. rose 1 percent.
panies rose more than the The Dow Jones Industrial It was the first big day of
rest of the market Friday. Average climbed 74 points, company earnings reports. This Oct. 25, 2016, file photo shows the New York Stock Ex-
United Technologies rose or 0.3 percent, to 24,998. Wells Fargo, which has change at sunset in lower Manhattan. Associated Press
1.6 percent and EOG Re- The Nasdaq composite been plagued by inves-
sources rose 1.7 percent, added 11 points, or 0.2 per- tigations into its business The S&P 500 index rose half points, or 0.1 percent, to
Financial stocks were cent, to 7,835. practices, lost 3 percent af- a point to 2,798. 24,956. The Nasdaq com-
broadly lower after inves- Stocks are opening slightly ter reporting a drop in earn- The Dow Jones Industrial posite added 8 points, or
tors weren't impressed higher on Wall Street as the ings. Average edged up 30 0.1 percent, to 7,832.q