Federal Reserve Chairman Jerome Powell warned that “the ultimate level of interest rates will likely be higher than expected.” Moreover, if faster tightening is warranted, the Fed “would be prepared to accelerate the pace of rate hikes,” Powell said.
Fed anticipates higher rates, faster hikes
Federal Reserve Chairman Jerome Powell presented the Fed’s semi-annual monetary policy report to the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee on Tuesday.
“My colleagues and I are acutely aware that high inflation causes significant hardship, and we are firmly committed to bringing inflation back to our 2% target,” Powell said in his identical remarks to the Senate and House Committees. Bedroom. He detailed:
Over the past year, we have taken strong steps to tighten the stance of monetary policy. We have come a long way and the full effects of our tightening so far have yet to be felt. Even so, we still have work to do.
“January’s data on employment, consumer spending, manufacturing output and inflation partly reversed the easing trends we saw in data just a month ago,” continued Powell.
Citing inflation well above the Fed’s 2% target and an “extremely tight” labor market, he noted that the Federal Open Market Committee (FOMC) meeting raised interest rates by 4-1 /2 percentage points over the past year. “From a broader perspective, inflation has moderated somewhat since the middle of last year but remains well above the FOMC’s long-term 2% target,” Powell described, noting:
We continue to expect that continued increases in the target range for the fed funds rate will be appropriate to achieve a monetary policy stance tight enough to bring inflation down to 2% over time.
While acknowledging that “inflation has moderated in recent months,” the Federal Reserve Chairman stressed that “the process of getting inflation back to 2% has a long way to go and will likely be bumpy.”
Warning that restoring price stability will likely require the Fed “to maintain tight monetary policy for some time,” Powell concluded:
The latest economic data is stronger than expected, suggesting that the ultimate level of interest rates is likely to be higher than expected. If all the data were to indicate that faster tightening is warranted, we would be prepared to accelerate the pace of rate hikes.
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