Yellen's successor Powell supports gradual rate hikes, easing rules
WASHINGTON, Nov. 30 (Xinhua) -- Jerome Powell, U.S. President Donald Trump's nominee to lead the Federal Reserve, said on Tuesday that he would support the central bank to continue to gradually raise interest rates while easing regulatory burdens on some financial institutions.
GRADUAL MONETARY NORMALIZATION
In his confirmation hearing at the Senate Banking Committee on Tuesday, Powell indicated that he would continue the gradual monetary policy normalization strategy laid out by current Fed Chair Janet Yellen.
"I think now the economy is strong, unemployment is low, growth is strong - in fact, it appears to have picked up - so it is time for us to be normalizing interest rates and the size of the balance sheet," he told lawmakers.
He said he expected the central bank will take three or four years to wind down the current 4.5 trillion-U.S.-dollar balance sheet to a level of 2.5 trillion dollars to 3 trillion dollars, which the Fed considers normal.
However, Powell stressed that his assessment was not absolute because the market demand for cash and reserves changes.Asked about the Fed's decision on the next policy meeting on Dec. 12 and Dec. 13, Powell indicated that he would support the central bank to raise the interest rate again in that meeting.
"I think that the case for raising interest rates at our next meeting is coming together," he said. "Conditions are supportive of doing that." But he cautioned that no decision will be made until the meeting.
According to his assessment of the U.S. economy, he expected it to grow 2.5 percent this year. "We continue to see...high confidence among businesses and households, accommodative financial conditions. The stock market is strong," he said.
"It feels like we're going to see continued strength next year."In regard to the current low inflation against the background of a tightening labor market, Powell said Fed officials were surprised by the softness in prices this year.
"One question is -- is it transitory, or are there more fundamental things at work here?" he told lawmakers. "We will have to be guided by the data as it comes in."Powell indicated that inflation will be an important indicator for the future policy path, as the job market is nearly at full employment. "We can afford... to go more slowly (in raising interest rates), if we determine that inflation is going to perform lower than we thought, and we can move more quickly," he said.
EASING REGULATORY BURDEN
At the hearing, Powell also vowed his support to ease regulatory burdens on some financial institutions while defending the regulatory regime the central bank has adopted since the financial crisis.
"I think they're tough enough," he said when asked whether any regulatory rules on financial institutions should be made tougher. "I can't really think of a place where we are lacking an important rule."
Powell said he supported the central bank to continue maintaining "the most intense and the most stringent" regulations on big and complex institutions but easing burdens on regional and community banks.
"Tailoring of regulation is one of our most fundamental principles," he said. Powell, currently a member of the Fed's Board of Governors, was nominated by Trump to replace Yellen, whose term expires in February 2018.There is no schedule for his confirmation vote at the Senate, but he is widely expected to be confirmed before Yellen's term ends. Enditem