WASHINGTON (AP) – New Federal Reserve Chairman Jerome Powell delivered a message Tuesday that wasn’t quite what Wall Street had expected: The U.S. economy is doing well, maybe even better than he thought late last year.
Powell emphasized in his first Congressional testimony that the central bank plans to raise rates gradually. Nonetheless, his growing optimism about the economy rattled investors. Treasury yields climbed and stocks fell amid fresh speculation that the Fed would accelerate the pace of hikes in its benchmark policy rate this year. The Dow Jones industrial average closed down 299 points.
The Fed raised rates three times in 2017 and had projected in December that it would raise rates another three times this year. However, many private economists said they now expected the Fed will boost rates four times this year rather than three.
“My personal outlook for the economy has strengthened since December,” Powell said when asked whether the Fed might boost its projection for rate hikes from three to four when it updates its outlook next month.
Powell would not say whether the Fed’s projection for rate hikes would change. But he noted a number of ways that the economic outlook has improved since December, including stronger data on growth and inflation, the passage of a $1.5 trillion tax cut in late December and an increase in government spending in a January budget deal.