U.S. Fed chair says he sees no evidence of overheating

Source: Xinhua| 2018-03-02 06:34:59|Editor: Zhou Xin

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U.S.-WASHINGTON D.C.-FED-CHAIR-TESTIMONY

U.S. Federal Reserve chair Jerome Powell (Front) testifies to the Senate Banking Committee at the Capitol in Washington D.C., the United States, March 1, 2018. Jerome Powell said on Thursday that he sees no evidence of economy overheating even as his outlook for the economy strengthened. (Xinhua/Ting Shen)

WASHINGTON, March 1 (Xinhua) -- U.S. Federal Reserve chair Jerome Powell said on Thursday that he sees no evidence of economy overheating even as his outlook for the economy strengthened.

"There's no evidence that the economy's currently overheating," Powell said before the Senate Banking Committee on Thursday.

He pointed out that there may be additional slack in the labor market, such as the labor force participation rate for prime age workers still below the level seen before the financial crisis.

"We don't see any strong evidence yet of -- of a decisive move up in wages," said Powell, adding that wage inflation is not at a point of acceleration

Most of the measures indicated that workers' wage continued to grow about 2.5 percent. The moderate wage growth is one of the signs for the labor market slackness.

"I would expect that some continued strengthening in the labor market can take place without causing inflation," Powell added.

The unemployment rate in U.S. has dropped to 4.1 percent, which Powell considered a level "at or near or even below most estimates of the natural rate of unemployment."

However, the inflation continued to run below the Fed's two percent target. In January, the personal consumption expenditure price index, a preferred inflation gauge by the Fed, rose 1.7 percent.

In view of the strong labor market and the soft inflation, Powell reiterated that the central bank would continue to gradually tighten the monetary policy.

"By continuing to gradually raise interest rates over time, we're trying to balance those two things ...achieve inflation moving up to target, but also make sure that the economy doesn't overheat," said Powell.

In his testimony before the House Financial Services Committee on Tuesday, Powell said that his outlook for the economy has strengthened since December last year, triggering market speculation that the Fed chair was open to faster interest rate hikes this year.

In December last year, Fed officials expected there would be three rate hikes this year. Market investors now expected that the Fed may raise interest rates four times this year in view of the stimulative fiscal policy, robust economic outlook and solid overseas growth.