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Low inflation 'at least partly' due to temporary factors, Powell says


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Low inflation 'at least partly' due to temporary factors, Powell says

The Federal Reserve's policy-making Federal Open Market Committee decided to increase its benchmark rate to a range of 1.5% to 1.75%. This live blog includes comments by Fed Chairman Jerome Powell in his press conference after the decision. There will be no further updates.

2:33 p.m. — "The job market remains strong," Powell said, adding that inflation is appearing to stabilize toward the Fed's 2% target.

2:35 p.m. — Powell said the recent inflation shortfall is "at least partly" due to temporary factors and that it "should move up closer to 2%" and stabilize around that figure in the medium term.

2:37 p.m. — The FOMC thinks further gradual rate hikes are necessary, the chairman said. "Raising rates too slowly would raise the risk that monetary policy would need to tighten abruptly down the road which would jeopardize the economic expansion," Powell said.

2:39 p.m. — He said the Fed is trying to take the "middle ground" as it balances inflation risks. Low inflation would "hurt us going forward" and the Fed needs to keep inflation expectations anchored around the 2% target, Powell added.

2:44 p.m. — Powell said it is "hard to say" whether the economy can grow at 3% on a sustained basis, saying it would take significant increases in productivity and labor force participation rates.

2:45 p.m. — The Fed has downgraded its expectation of what full employment means because the actual figure is not certain, the chairman noted. "We're mindful of the uncertainty of that," he said.

2:46 p.m. — Powell is "carefully considering" holding more press conferences. "I would want to think very carefully about it and make sure that no one would take more frequent press conferences as a signal of the path of policy," he said.

2:49 p.m. — The FOMC discussed the impacts of tariffs, but officials do not think "changes in trade policy should have any effect on the current outlook," Powell said. But a number of FOMC participants said business leaders are worried "that trade policy has become a concern going forward," he noted.

2:52 p.m. — Asked what it would take for the Fed to signal four rate hikes in 2018, Powell emphasizes that the FOMC's summary projections are just forecasts. "It could change up. It could change down," he said. "For now, these are the best forecasts that people could make."

2:56 p.m. — Powell said the Fed is "hopeful" that recent tax reform in the U.S. would increase productivity, but he said estimates are "really all over the place" on the tax changes' effects on productivity growth.

3:00 p.m. — It is "a little bit of a misnomer" to think that the Fed's interest payments on banks' excess reserve is a subsidy, the Fed chairman said, because banks could get similar rates elsewhere in short-term money markets. "It's not a subsidy, and it's not a cost to the taxpayer," he added.

3:03 p.m. — Powell does not have major concerns over financial stability because he believes post-crisis regulations have led to more stable financial institutions. He said there are some areas with elevated prices relative to their historical norms, such as some equities or commercial real estate, "but we don't see it in housing, which is key."

3:07 p.m. — If Congress increases the automatic asset threshold for enhanced prudential standards on banks, the Fed would not be "shy" about keeping those standards for some institutions with less than $250 billion in assets.

3:10 p.m. — Powell declined to comment on possible additional tariffs on China and said the topic was not mentioned in the FOMC meeting. "We don't do trade policy here at the Fed, and I would be reluctant to comment on any particular situation with any particular country," he said.

3:11 p.m. — Powell has been surprised that wages have remained subdued despite tight labor markets, but he declined to say at what pace wages should be growing in the Fed's view. "I think we will know that the labor market is getting tight when we do see a more meaningful upward move in wages," he said.

3:15 p.m. — The Fed chairman downplayed concerns about flattening yield curve: "I don't think that recession probabilities are particularly high at the moment, any higher than they normally are."