July 13, 2018 / 1:09 AM / in 5 months

Fed's Powell: Trump stimulus to boost economy for 'at least' 3 years

WASHINGTON (Reuters) - Federal Reserve Chairman Jerome Powell said he believes the U.S. economy remains in a “good place,” with recent government tax and spending programs likely to boost gross domestic product for perhaps three years.

FILE PHOTO: Federal Reserve Board Chairman Jerome Powell arrives at his news conference after the two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, U.S., June 13, 2018. REUTERS/Yuri Gripas/File Photo

“I think the economy is in a really good place,” Powell said in a radio interview with Marketplace. “When you lower taxes and increase spending you’re going to see more economic activity in all likelihood. You are going to see significant support for. ..economic activity probably for at least the next three years.”

Powell did not comment on interest rate policy directly in the roughly 20 minute conversation scheduled to be aired Thursday. An advance transcript was provided by Marketplace.

Powell’s remarks come as the Fed tries to navigate toward higher interest rates at a pace that keeps inflation under control but without going so far or fast that it slows the economy.

The central bank is also pulled two ways by the Trump administration’s competing impulses - a tax and spending package that has added to short-term growth, alongside tariff and trade disputes many Fed officials worry could do economic harm.

Powell said it remains unclear how the trade disputes will end, but that he felt the fiscal programs would boost the economy for several years to come.

That estimate is on the high side of what other Fed officials have indicated.

In the most recent forecasts by policymakers, gross domestic product is seen accelerating to an annual growth rate of 2.8 percent this year, but slowing to 2.4 percent in 2019 and 2 percent in 2020 before pulling back to what is considered its long-run potential growth rate of 1.8 percent. [nW1N1SM027]

The economy grew at a 2.3 percent clip in 2017.

Powell will be on Capitol Hill next week for his semiannual appearance before Congress. The central bank is scheduled to release its accompanying policy report ahead of that on Friday.

Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci

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