By Denny Gulino

WASHINGTON (MaceNews) – Federal Reserve Chairman Jerome Powell Wednesday, in a generally soothing news conference, stressed his “practical” approach to rate hikes, keeping pace with a strengthening “solid” economy while being careful not to do too much.

He confirmed that he will indeed begin holding a news conference after every Federal Open Market Committee meeting, providing an unprecedented amount of Fed guidance to the markets, beginning in January – and making clear the Fed is moving past the Janet Yellen era with a new chairman in place.

“That will give us more opportunities to explain our actions and answer questions,” he said, taking the Fed another big step forward in its slow evolution toward greater transparency.

The latest “dot plot,” which Powell said will continue to be updated only quarterly, pegged median growth up 0.3 points to 2.8% this year, 2.4% next year and 2.0% in 2020, less than the at least 3% projected by the Trump administration steadily through the next three years.

Yet Powell, on that question as well as on whatever is the neutral rate of unemployment, suggested he is willing to let future data resolve any discrepancy rather than being concerned about forecasts for which precision is impossible.

The Powell Fed remains “grounded in the data,” he said, with a lean toward “practical” policy, perhaps in contrast to any more rigid academic theory. His answers to questions were notably free of economic jargon.

The view of Fed officials implied that when this year is ended, there will have been four rate hikes, or one more per quarter.

Powell noted that the labor participation rate, having moved hardly at all, is actually sending a positive signal, since the retirement of Baby Boomers and other factors would be expected to show it declining.

“We expect the job market to remain strong,” he said.

The FOMC’s policy statement repeated “the stance of monetary policy remains accommodative” and Powell acknowledged that at some point that language will have to be dropped. That question, of when, is another that at this point is unanswerable, he suggested.

“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-3/4 to 2 percent,” the policy statement said, as expected. “The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”

The “dot plot” suggested the unemployment rate at the end of this year will be 3.6%. “a bit lower” than was seen previously, he said. Inflation has “moved close” to the 2% target and Powell reaffirmed that the Fed not “overreact” if it slips above that mark for a time.

“We do not want to declare victory” on inflation, he said, until it can be shown that a 2% rate can be sustained and at the same time the Fed would continue to be concerned if inflation persistently ran above or below the target. Higher oil prices, he said, will alone likely be enough to take inflation above 2% in the months ahead but nevertheless is a temporary influence with little lasting effect on the long-term.

The FOMC statement no longer said the federal funds rate is expected to remain accommodative for some time, something Powell said was to be expected as short-term rates approach whatever is the neutral interest rate. “We expect to make further gradual increases in that rate,” he said.

The natural rate of unemployment, he said, moves very slowly with “wide bands of uncertainty.”

On wages, he said it’s a “bit of a puzzle” what wages have not had a more positive reaction to the growing scarcity of labor but the “puzzle” doesn’t mean it’ a “mystery.”

The FOMC did not alter its announced program to shrink its balance sheet but it did what Powell termed a “minor technical adjustment” in its rate of interest on excess reserves, again, as expected, setting it five basis points below the fed funds ceiling.

Powell, answering questions, said he is not overly concerned about being close to the “zero bound,” where the policy rate is zero, now that the fed funds rate tops out at 2%, and that risks are “roughly balanced.”

In fact, Powell reflected few concerns about policy or the economy, other than nonfinancial corporate bonds, where leverage, he said, is above historical averages. The fact the yield curve is flattening, rather than being a warning sign, is what is to be expected when the Fed is raising rates, he said.

Staying with Chair Yellen’s trajectory on rate hikes, Powell said, has “borne fruit,” but future data will determine whether that trajectory needs to change.

Asked how the Fed is dealing as a regulator with the marijuana legalization by many states while banks are still constrained by the federal prohibition Powell said he wished Congress would resolve the legal confusion.

Asked if the Fed has a view of the Trump administration’s turbulent trade policy Powell said he is not inclined to comment other than to say he would rate it another risk factor.

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