WASHINGTON – Jerome Powell, President Donald Trump's nominee to become the next chairman of the Federal Reserve, said he expects the central bank to continue gradually raising interest rates to support the central bank's goals of maximum employment and stable prices.
In prepared testimony released on Monday that he will deliver Tuesday at his confirmation hearing before the Senate Banking Committee, Powell also said the Fed would consider appropriate ways to ease the regulatory burdens on banks while preserving the core rules enacted under the Dodd-Frank financial reform law following the 2008 financial crisis.
"Our aim is to sustain a strong jobs market with inflation moving gradually up toward our target," he said. "We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink."
Powell, a member of the Fed's board since 2012, is expected to win confirmation to succeed Janet Yellen, whose term expires in February.
Many expect Powell to stick to the monetary policy the Fed has pursued under Yellen, whose term expires in February. That calls for small interest rate hikes, as opposed to the sharper increase in borrowing costs that some conservative economists have called for. Lower rates generally support economic growth.
In his remarks, Powell sought to send the reassuring message that he would represent a figure of stability and continuity at the Fed, while remaining open to making certain changes as appropriate.
The Fed has raised rates four times starting in December 2015, including two rate hikes this year. Economists expect a third rate hike to occur in December, and they're projecting at least three additional rate increases in 2018.
On banking regulations, Powell said, "We will continue to consider appropriate ways to ease regulatory burdens while preserving core reforms ... so that banks can provide the credit to families and businesses necessary to sustain a prosperous economy."
Among those reforms, Powell mentioned the higher standards for capital and liquidity that banks must maintain under the Dodd-Frank financial reform law and the annual "stress tests" the biggest banks must undergo to show they could withstand a severe downturn.
Powell cautioned that while Fed officials want to make the path of interest rate policy as predictable as possible, "the future cannot be known with certainty." For that reason, he said, it's important for the Fed to retain the flexibility it needs to adjust its policies in response to economic developments.
Powell was nominated early this month by President Donald Trump to be the next Fed chairman after a search process in which Trump interviewed five finalists, including Yellen.
Yellen, a Democrat who was nominated by President Barack Obama, announced last week thatonce Powell is confirmed to succeed her as Fed chair. Yellen could have remained on the board even after Powell became chair.