Fed to 'proceed carefully' amid rising Treasury yields, economic strength: Powell By

– Federal Reserve Chairman Jerome Powell on US three major online foreign exchange trading companiesThursday said the Fed is "proceeding carefully" on monetary policy decisions following a spike in Treasury yields that have helped tighten financial conditions "significantly," though acknowledged that signs of ongoing economy growth could warrant further monetary policy tightening.  

Highlighting the backdrop of a still tight labor market and the 11-rate hikes delivered so far - that could still tighten financial conditions - Powell said the Federal Open Market Committee, or FOMC, is "proceeding carefully," on monetary policy decision. 

The Fed chief, however, acknowledged that the jump in longer-term U.S. government bond yields has tightened financial conditions and could help the Fed in its battle to rein in inflation.

"Financial conditions have tightened significantly in recent months, and longer-term bond yields have been an important driving factor in this tightening," Powell said in prepared remarks Thursday for a speech at the Economic Club of New York Luncheon, New York.

Still, above-trend economic growth or signs that tightness in the labor market is no longer easing, could "put further progress on inflation at risk and could warrant further tightening of monetary policy," the Fed chief said.

"Many forecasts calling for the U.S. economy to be in recession this year," Powell said, but "growth is now running for this year above its longer-run trend." "This has been driven largely by consumer spending, driven by a very strong job market," he added.

The remarks from Powell arrived just as the yield on the 10-year Treasury flirted with 5% for the first time since 2007 following Thursday that pointing to a still strong job market.

The most recent measure of core PCE showed a slowdown in the pace of inflation to 3.9% in August from 4.3% previously, though that is still well ahead of the Fed’s 2% target.

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