WASHINGTON – President Donald Trump’s nominee to head the Federal Reserve, Jerome “Jay” Powell, pointed on Tuesday to a possible interest rate hike in December, citing the country’s economic improvement, at the same time that he remarked on the strength of the US financial system.
Powell told Republican and Democratic senators at his confirmation hearing before the Senate Banking Committee that he thinks regulations on Wall Street banks are “tough enough” and that the US banking system is in generally good shape.
“The banking system is healthy,” Powell remarked, going on to say that he feels that the US no longer has any banks that are “too big to fail” because of current regulations, such as financial stress tests.
But later in the hearing he acknowledged that “there’s certainly a lot of regulatory burden” and that he would support easing the regulations on smaller banks and “rewriting” the Volcker Rule, which governs the activities of big Wall Street firms that want to undertake riskier trading.
He said that he thought that the argument for raising interest rates at the Fed’s December 12-13 meeting was gelling, although the US central bank has raised interest rates twice so far in 2017 to between 1-1.25 percent.
At that meeting, at which current Fed Chairman Janet Yellen will offer her last press conference on monetary policy, analysts expect that the central bank will announce a new rate hike to the 1.25-1.5 percent range.
Powell praised Yellen’s work heading the Fed, saying that he has worked with her since 2012 as a member of the Board of Governors and adding that – if confirmed in the post – he would pursue a policy of continuity.
He reiterated that US economic health is good and there have been two consecutive quarters of annualized growth above 3 percent with unemployment at just 4.1 percent.
Powell, 64, said that the caution shown by the Fed in implementing rate hikes has been beneficial for the nation.
Although he touted continuity to lawmakers, it has been suspected that Powell, because of his experience with Wall Street investment banks, might roll back the so-called Dodd-Frank financial reform pushed through in 2010 by then-President Barack Obama, a move that increased financial supervision and regulation.
Supposed excess regulatory burdens have been criticized by Trump and Republican lawmakers, who feel that they have impeded the flow of credit to consumers and businesses.
The markets reacted positively on Tuesday to Powell’s remarks with Wall Street’s main indicator – the Dow Jones Industrial Average – rising some 256 points, or slightly more than 1 percent, near the close of trading.
Powell is not expected to encounter any significant problems being confirmed by the Senate, whereupon he would take over the Fed chairmanship in February 2018.