Fed’s Powell Sees No Risk of Labor Market Overheating

Originally Published at Fidelity.com

Federal Reserve Chairman Jerome Powell said he doesn’t see evidence the labor market is at risk of overheating, or generating a sharp upturn in price pressures, in remarks set for delivery Tuesday in Boston.

In an address to business economists, Mr. Powell pushed back against criticism that Fed officials’ current projections of sustained, very low unemployment are underestimating the prospect of inflation rising significantly above the central bank’s 2% target.

The Fed raised its benchmark federal-funds rate last week to a range between 2% and 2.25%. Officials’ individual projections released after the meeting signaled most expected to lift rates by another percentage point through next year.

The speech suggests little urgency by the Fed chairman to push interest rates up to a level designed to deliberately slow the economy.

Economic projections released after last week’s Fed policy meeting envisioned an unusually favorable set of conditions in which the unemployment rate holds below 4% over the next three years but inflation never rises far beyond the Fed’s 2% target.

By Nick Timiraos and Paul KiernanFederal Reserve Chairman Jerome Powell doesn’t see evidence the labor market is at risk of overheating, or generating a sharp upturn in price pressures, he said in prepared remarks Tuesday in Boston.

In an address to business economists, Mr. Powell pushed back against criticism that Fed officials’ current projections of sustained, very low unemployment are underestimating the prospect of inflation rising significantly above the central bank’s 2% target.

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