Thu, Feb 15, 2018 - Page 10 News List

Fed to maintain post-crisis regulations

‘REMAIN ALERT’:The new Fed chairman said he favors striking a balance between keen oversight and overregulation, while preventing a buildup of financial risks


Newly installed US Federal Reserve Chairman Jerome Powell on Tuesday pledged to preserve the key gains made in banking regulation since the global financial crisis and continue gradual interest rate increases.

Powell, who took over as Fed chairman on Monday last week, just as Wall Street took a vertiginous dive, also said the central bank would continue to reduce its bond holdings which reached more than US$4.5 trillion.

“We are in the process of gradually normalizing both interest rate policy and our balance sheet with a view to extending the recovery and sustaining the pursuit of our objectives,” Powell said in remarks at a ceremonial swearing-in event.

Powell had been widely seen as more amendable to US President Donald Trump’s deregulation agenda, but the Fed chief reiterated that he favored striking a balance between keen oversight and overregulation, while preventing a buildup of new risks.

The US central bank will “preserve the essential gains in financial regulation while seeking to ensure that our policies are as efficient as possible,” he said. “We will remain alert to any developing risks to financial stability.”

Fed policymakers are widely expected to adopt this year’s first interest rate hike late next month, aiming to keep ahead of an anticipated rise in inflation this year.

It is to be the first monetary policy meeting led by Powell, who is not an economist, but has been on the Fed board since 2012, and he is to hold his first news conference after the decision is announced.

Meanwhile, the White House is considering Federal Reserve Bank of Cleveland President Loretta Mester as it reviews candidates to be the central bank’s vice chair, according to a person familiar with the matter.

The person, who discussed the situation on the condition of anonymity, said Mester impressed the selection team, but said there was no front-runner for the post of No. 2 to Powell.

Mester, 59, is known for her mildly hawkish views on monetary policy.

Last year, she argued for four interest-rate hikes when the Federal Open Market Committee lifted rates three times.

She repeated her view on Tuesday that the Fed should continue to hike rates gradually this year “at a pace similar to last year’s.”

She also said that recent tax cuts had added upside risks to her outlook for the US economy.

The Trump administration has for weeks been searching for someone to replace Stanley Fischer, who stepped down as vice chairman in October last year.

San Francisco Fed President John Williams and Mohamed El-Erian, chief economic adviser at Allianz SE, have also been considered by the White House.

Mester’s candidacy was reported on Tuesday last week by the Wall Street Journal, which also said Pacific Investment Management Co’s Richard Clarida had been interviewed.

The US president’s nominees to the Fed Board are subject to US Senate confirmation.

Additional reporting by Bloomberg

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