Fed to continue further, gradual rate hikes: Chair

Rupee Extends Weakness Against US Dollar 10 Things To Know

As the USA economy has recovered, the Fed has raised the benchmark lending rate seven times since December 2015, twice this year under Powell, and is expected to hike again in September and December.

"It looks like he understands the light touch he has to have on raising rates versus inflation", Kim Forrest, senior portfolio manager at Fort Pitt Capital Group LLC in Pittsburgh, said by phone. "The economy is strong". Most people who want jobs can find them.

The Fed seems to be "doing as good a job as they cannot to overshoot" the tightening of monetary policy, said David Levy of Republic Wealth Advisors.

US President Donald Trump had earlier this week said he was "not thrilled" with the Federal Reserve under his own appointee for raising interest rates.

European stocks look set to open largely unchanged on Friday as trade talks between the US and China ended without progress, raising concerns that a prolonged trade spat could hurt global growth.

All three major USA indices pushed higher, with the S&P 500 notching its first closing record since January and the Nasdaq jumping 0.9 percent to 7,945.98, smashing past a record set last month.

One of the topics at this year's gathering of central bankers is the slope - not of the Grand Teton Mountains but of the yield curve.

The Fed is very confident in the USA economy and Powell indicated there is no intention of slowing down the Fed's rate hikes, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

But Powell sounded bullish on the economic expansion.

New research from the Federal Reserve, posted ahead of a speech Friday by Chairman Jerome Powell, warns policy makers against placing too little attention on potential effects of very low unemployment on inflation.

Policymakers at the central bank have already voted to hike the benchmark federal funds rate twice this year, and are expected to do so twice more in 2018, bringing the yearly total to four.

The odds of two additional hikes this year increased this week as Fed officials were seen as more hawkish.

Long-dated bonds are meanwhile being supported by restrained inflation and demand by foreign central banks that are continuing bond purchase programs. Until Friday, most economist forecasts had suggested the Fed would raise rates so the top end of that range hits 3.25% around the end of 2019.

Two days of talks between Washington and Beijing ended on Thursday with no major breakthrough as their trade war escalated with activation of another round of dueling tariffs on $16 billion worth of each country's goods.

Tim Duy, a professor at the University of OR, said the Fed is now at a unsafe point.

He stressed that estimates of how the economy works - like those followed by doctoral economists on the Fed staff - were at best "hazy" navigational guides.

Powell focused his remarks in part on the difficulty the Fed faces in setting interest-rate policies at a time when the economy seems to be undergoing changes that challenge long-standing beliefs of how low unemployment can fall before it ignites inflation pressures. "With no clear sign of an inflation problem, why is the FOMC tightening policy at all, at the risk of choking off job growth and continued expansion?"

"My colleagues and I are carefully monitoring incoming data", he said.

As a result, "if the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate", Powell said, echoing recent FOMC statements.

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