Federal Reserve Chairman Jerome Powell said Friday that the healthy U.S. economy and low inflation are allowing the central bank to take a “patient, wait-and-see approach” on interest rates.
The Fed’s moves to reduce its balance sheet, which hit a peak of $4.5-trillion, are being watched closely by investors. Powell said the size of the holdings will “prove ample” to meet the Fed’s needs of supplying reserves to the banking system and he said “we could be near that level later this year.”
One area being examined is whether the Fed should consider altering its inflation target, which is currently a goal of annual price increases of 2 per cent, to allow inflation to go above that goal for a time.Powell did not specifically discuss the course of rate hikes other than to repeat the “patient” pledge the Fed began using in January to signal that it was planning a prolonged pause in hiking rates this year after boosting them four times in 2018.