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 While acknowledging that employment in the United States had
rebounded, Powell highlighted "significant" slack, referring to
unemployed or underutilised workers.
The Fed hopes to end its stimulus programme for the U.S. economy by
the end of the year, clearing the way for it to eventually raise
interest rates.
"I’m looking for some sign the economy is getting tight before we
can start thinking about raising rates," Powell said at an event in
London.
Powell added there was a "significant amount of slack in the labour
market" in the United States at present.
In brief prepared remarks, Powell said the Fed's evolving statements
about the future path for rates have played an important role in
shaping market expectations about U.S. monetary policy.
With the overnight federal funds rate stuck near zero for years, he
said the management of expectations has been important in allowing
investors to buy and sell bonds with confidence that rates would not
unexpectedly increase.
That, for example, has lowered the premium charged for longer-term
loans, and helped tamp down volatility as well, Powell said.
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"Forward guidance has generally been effective in providing support
for the economy at a time when the federal funds rate has been
pinned at its effective lower bound," said Powell, who is awaiting
Senate confirmation to a new 14-year term on the Fed board.
Powell added that markets were "well aligned" with the guidance the
central bank has offered about the likelihood that its asset-buying
programme will be stopped by the end of the year.
(Additional reporting by Howard Schneider in Washington; Editing by
Hugh Lawson)
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