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Powell Says U.S. Economy “Very Strong,” Can Handle Higher Rates

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By Geoffrey Smith 

Investing.com — The U.S. economy is still strong and can handle the planned series of interest rate rises, Federal Reserve Chair Jerome Powell said on Wednesday.

“The American economy is very strong and well positioned to handle tighter monetary policy,” Powell said in his opening remarks to the Senate Banking Committee at the start of two days of testimony before Congress on the state of the economy.

Powell also noted that “real gross domestic product growth has picked up this quarter, with consumption spending remaining strong,” although he acknowledged that “business investment appears to be slowing” and also said that the housing market is cooling as higher mortgage rates make themselves felt.  

At the same time, Powell stressed the Fed’s determination to bring inflation down to its 2% target from the current 40-year high of 8.6%.

“We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so,” Powell said. He argued that financial conditions have already tightened significantly since the Fed started withdrawing the stimulus it put in place at the start of the pandemic two years ago.

He added, however, that he couldn’t rule out further upside surprises, pointing to the ongoing tightness of energy and other commodity markets due to Russia’s invasion of Ukraine 

“Making appropriate monetary policy in this uncertain environment requires a recognition that the economy often evolves in unexpected ways,” he said. “Inflation has obviously surprised to the upside over the past year, and further surprises could be in store.”

Powell said the Fed will need to be “nimble” in responding to any change in the economic outlook. 

Powell Says U.S. Economy “Very Strong,” Can Handle Higher Rates

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