WASHINGTON: The Federal Reserve says it expects that the ongoing strength of the US economy will warrant gradual increases in interest rates this year, delivering the same steady-as-it-goes message under new leader Jerome Powell as it had provided under Janet Yellen.

The Fed’s projection on rate hikes came with the release Friday of its semi-annual monetary report to Congress. Powell will testify on the report before the House Financial Services Committee next Tuesday, making his first public appearance since taking over as chairman earlier this month.

The report stated that the Fed expects steady economic gains will warrant “further gradual increases” in the Fed’s benchmark rate. But it said the rate was likely to remain low enough to stimulate the economy over the next two years.

The Fed’s key policy rate is currently in a range of 1.25 per cent to 1.5pc. The Fed raised rates three times last year with the last hike occurring in December. The Fed had pushed the rate to a record low near zero in December 2008 as it struggled to contain a severe financial crisis and the deepest economic downturn since the Great Recession of the 1930s.

It kept the rate unchanged for seven years until December 2015 and since that time has boosted the rate in five tiny quarter-point moves, including three rate hikes last year.

At the December meeting, Fed officials signaled that they expected to raise rates another three times in 2018.

Published in Dawn, February 24th, 2018