Fed Chairman Jerome H. Powell told Congressmen that even 15 months after the central bank launched its campaign to cool the economy and tackle rapid inflation, the United States still has low and steady inflation. He plans to say that he is still “far away” from Prices will rise.
Mr. Powell is scheduled testify before At 10 a.m. on the House Financial Services Committee, he will tell lawmakers that the labor market is still very tight and that while inflation is down significantly from its peak last summer, it is still too fast. Given this, the Fed could raise interest rates even further from its current level of just over 5%.
“Inflation has moderated somewhat since the middle of last year,” Powell said in a prepared statement. “Nevertheless, inflationary pressures remain high and the process of returning inflation to 2% is a long way off.”
Fed officials kept rates unchanged last week after 10 straight rate hikes. But central bank officials are adamant that a moratorium decision does not declare victory over inflation. Rather, by tackling policy more slowly, policymakers will be given time to assess how well policy rate hikes are working against the economic slowdown, and not overdo it. It strikes a delicate balance of taking sufficient steps to curb growth in the future.
“Given the distance and speed so far, we decided it was prudent to keep the target range constant,” Powell told lawmakers on Wednesday. Still, he added, “nearly all” voting Fed officials “expect further rate hikes to be appropriate before the end of the year.”
Central Bank Officials Release Latest Forecasts economic forecast Last week, the Fed said it would likely raise interest rates to around 5.6% this year, which would be two quarters of a point hike. Mr. Powell said at a press conference after the decision last week that the July 25-26 Fed meeting would be held “live,” meaning that rates could be raised at the same meeting.
investors can only hope The Fed plans to raise rates one more time before deferring a rate hike later this year based on market prices, but there is still a lot of uncertainty in that projection – the market has put some odds on a rate hike, and the year-end Putting some odds on a rate cut by 2023.
The Fed needs to assess how much the economy is slowing and whether it will be enough to bring inflation back to its 2% target over time. Overall growth and the housing market have cooled since 2021, but consumption and even house prices have shown signs of strength recently, and employment continues to advance rapidly.
“We are seeing the effect of tightening policy on demand in the most rate-sensitive sectors of the economy,” Powell told lawmakers. “However, it will take time for the full effect of monetary restraints to materialize, especially with respect to inflation.”
