Fed’s Powell Says Data to Guide His View on September Rate Rise

Federal Reserve Governor Jerome Powell said that while the “time is coming” to raise interest rates, he’s waiting to see how economic data bear out before deciding whether to support such a move next month.

“Fortunately, I don’t have to figure it out now,” Powell said Wednesday in a CNBC interview. “I’m going to be very, very focused on the data.”

Powell said he’ll be especially attuned to employment data before the next meeting of the policy-setting Federal Open Market Committee, and that the labor market has been giving a better signal of economic growth than gross domestic product. Even so, there may be more slack in the labor market than the unemployment rate of 5.3 percent indicates, he said.

“The time is coming. I think most members of the FOMC at the June meeting believed that it was time to raise interest rates sometime this year,” Powell said. “When we do that, there will be -- if the economy continues to grow -- there will be a process of raising rates, gradually, over time.”

Powell’s comments come after two of his colleagues signaled a willingness to raise interest rates next month for the first time since 2006.

Dennis Lockhart, president of the Atlanta Fed and a voting member this year of the FOMC, told the Wall Street Journal in a story published Tuesday that it would take a significant deterioration in the data to convince him not to begin in September.

St. Louis Fed President James Bullard told the Journal last week that “we are in good shape” for a rate increase next month.

The economy expanded at a 2.3 percent annual rate in the second quarter, in line with Fed Chair Janet Yellen’s view that a dismal reading early in the year was transitory. Still, inflation hasn’t exceeded the Fed’s target for three years.

Employment reports for July and August will be released before the next FOMC meeting, set for Sept. 16-17, and will be followed by a Yellen press conference. The July jobs report will be released Friday, and the median estimate in a Bloomberg survey of economists projects an increase of 225,000 jobs.