Investing.com - Federal Reserve chairman Jerome Powell emphasized the need for gradual rate hikes in a speech delivered at the Jackson Hole Economic Symposium on Friday, but downplayed the need for a more aggressive stance, sending the dollar lower.
In his speech, Powell identified two risks: “moving too fast and needlessly shortening the expansion, versus moving too slowly and risking a destabilizing overheating”.
“I see the current path of gradually raising interest rates as the FOMC's approach to taking seriously both of these risks,” he stated.
But Powell also indicated that there was no clear sign of an acceleration above the Fed’s 2% inflation objective and said there did not seem to be an elevated risk of the economy overheating.
“As the most recent FOMC statement indicates, 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,” he concluded.
Investors took Powell’s speech as a more dovish stance, which seemed to rule out the need for a more aggressive tightening as he suggested a lack of inflationary pressure and put the caveat for further gradual increases in interest rates on a continuation of current economic strength and a strong labor market.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, extended losses, falling 0.58% to 95.00 by 10:20 AM ET (14:20 GMT), compared to 95.22 ahead of the speech.