Jerome Powell, the chairman of the Federal Reserve, stated on Friday that it was premature to determine whether the main interest rates set by the US central bank are high enough to contain inflation.
Since the Fed started its tightening cycle last year, inflation has drastically decreased, with rates at a 22-year high and the most recent measure showing 3% annual price growth.
After their meeting on December 12–13, it is anticipated that Fed officials will once more leave interest rates unchanged.
Now that inflation appears to be moderating, markets are anticipating a potential interest rate reduction from the central bank.
Mr. Powell pointed out that core inflation over the previous half-year ran at an annual rate of 2.5%, not too dissimilar from the Fed’s long-term target of 2%.
“That progress needs to keep going,” he declared at a fireside talk at Atlanta, Georgia’s Spelman College.
A slowdown in consumer spending appears to be a result of the Fed’s interest rate policies, according to recent reports.
A slowdown in consumer spending appears to be a result of the Fed’s interest rate policies, according to recent reports.
He stated, “Our policy rate has moved well into restrictive territory as a result of the strong actions we have taken, meaning that tight monetary policy is putting downward pressure on economic activity and inflation.”
But Mr. Powell cautioned that it is too soon to declare victory.
“It would be premature to speculate on when policy might ease, or to conclude with confidence that we have achieved a sufficiently restrictive stance,” he stated.
The chairman has stated repeatedly in recent months, “We are prepared to tighten policy further if it becomes appropriate to do so,” he continued.
According to Fed projections, interest rates will rise by one more quarter point this year before falling to between five and five-and-a-half percent by the end of 2024. Traders, according to CME data, think the Fed is done hiking rates and will start lowering them as early as March.
This week, additional Fed officials concurred that interest rates are currently at a sufficiently restrictive level