WASHINGTON—Federal Reserve Chairman Jerome Powell indicated a positive economic outlook when delivering testimony this week before the House Financial Services Committee.
NAFCU Chief Economist and Vice President of Research Curt Long said his remarks indicate the possibility of four rate hikes this year.
"NAFCU had previously forecast a rate hike in March and cautioned members that four rate hikes in 2018 was a distinct possibility," said Long. "Chairman Powell's remarks reaffirm those sentiments. Most observers have penciled in a March move, and markets are coming around to the idea that one hike-per-quarter could be the Fed's playbook over the course of the year."
The Federal Open Market Committee (FOMC) – the Fed's monetary policy-setting arm – next meets March 20-21, during which a rate hike is expected. Powell noted during Tuesday's hearing that his "personal outlook for the economy has strengthened since December."
Estimates from the CME Group released Tuesday show that the markets have placed odds of four or more rate hikes in 2018 at 35%, up from 24% Monday, Long noted. Powell is set to deliver similar testimony Thursday before the Senate Banking Committee.
Long noted items from Powell's prepared HFSC testimony:
- "Fiscal policy has become more stimulative and foreign demand for U.S. exports is on a firmer trajectory"
- The lack of inflation growth last year likely reflects "transitory influences that we do not expect will repeat" and should stabilize around the FOMC's 2% objective
- Wages should increase at a faster pace
- The U.S. economy has grown at a solid pace
- "Strong job gains in recent years have led to widespread reductions in unemployment across the income spectrum and for all major demographic groups"
- "Growth in business investment stepped up sharply last year, which should support higher productivity growth in time."
During the hearing Powell was asked by several committee members about regulatory relief for smaller financial institutions, including credit unions. He said he is committed to relieving unnecessary regulatory burdens for financial institutions, Long noted.