Federal Reserve Chairman Jerome Powell signaled Friday that he expects the Fed to continue gradually raising interest rates if the U.S. economic expansion remains strong.

Powell added that while annual inflation has risen to near the Fed’s 2 percent target rate, it doesn’t seem likely to accelerate above that point. That suggests that he doesn’t foresee a need for the Fed to step up its rate hikes. Late next month, the Fed is widely expected to resume raising rates.

Speaking to an annual conference of central bankers in Jackson Hole, Wyoming, Powell said the Fed recognizes that it needs to strike a careful balance between its mandates of maximizing employment and keeping price increases stable. He said a gradual approach is the best way for the Fed to navigate between the risks of raising rates too fast and “needlessly shortening the expansion” and moving too slowly and risking an overheated economy.

“My colleagues and I,” the Fed chairman said in his speech, “are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2 percent.”

Powell made no mention of the recent public criticism from President Donald Trump, who has said he’s unhappy with the Fed’s rate hikes. The president has complained that the Fed’s tightening of credit could threaten the continued strong growth he aims to achieve through the tax cuts enacted late last year, a pullback of regulations and a rewriting of trade deals to better serve the United States.

Many have seen Trump’s complaints about the Fed’s rate hikes as an intrusion on the central bank’s longstanding independence from political influence. On Thursday, two top Fed officials made clear Thursday that Trump’s criticism won’t affect their decisions on whether to continue raising rates.

Powell also made no mention in his speech of what many economists see as the most serious threat to the economy: The trade war that Trump has launched with America’s main trading partners — a conflict that risks depressing U.S. and global economic growth the longer it goes on.

The Fed chairman focused his remarks in part on the difficulty the Fed faces in setting interest-rate policies at a time when the economy seems to be undergoing changes that challenge long-standing beliefs of how low unemployment can fall before it ignites inflation pressures. He said there is also much uncertainty over the “neutral” rate of inflation —  the point at which the Fed’s policy rate is neither stimulating economic growth or holding it back.

The Fed’s economic projections, compiled from estimates of all Fed officials, estimates the current neutral rate at 2.9 percent. But Powell noted that there’s a wide difference of opinion about it.

After having kept its key policy rate near zero for seven years to help lift the economy out of the Great Recession, the Fed has raised rates seven times, most recently in March and June this year. Most Fed watchers foresee two more hikes this year — next month and then in December.

Powell said the Fed’s incremental approach to raising rates has so far succeeded.

“The economy is strong,” he said. “Inflation is near our 2 percent objective and most people who want a job are finding one. We are setting policy to do what monetary policy can do to support continued growth, a strong labor market and inflation near 2 percent.”
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