Gradual subsequent rate hikes after first lift-off appropriate – Fed’s Powell

FXStreet (Mumbai) - The US central bank will raise interest rates later this year, but the pace of the lift-off should be increasingly gradual to allow the world's largest economy to fully heal from the recent global financial crisis, Fed Board of Governors member Jerome Powell said on Wednesday.

Key Quotes:

"The financial crisis did significant damage to the productive capacity of our economy, and the damage was of a character, extent and duration that cannot be fully known today,"

"Given this uncertainty, it is even more difficult than usual to assess how much slack remains. It seems plausible that at least part of this supply-side damage could be reversed if the economy enjoys a period of sustained growth."

Speaking further, he expected a cycle of rate hikes, the Fed's first in more than eight years, to begin "later this year," as early as the Fed's June meeting.

"From a macroeconomic perspective, the precise timing of liftoff is less important than the path of subsequent additional rate increases,"

"If the economy continues on its expected path, it will be appropriate for a time to increase rates fairly gradually."

"Despite slowing in March, job creation has been particularly strong over the past two years,"

"[But] the unemployment rate probably understates the amount of slack still remaining in the labor market."