new york: Federal Reserve Chairman Jerome Powell said Thursday (October 19) that despite the recent economic slowdown, U.S. inflation “remains too high,” opening the door to another rate hike. said it will remain open.
He told a news conference there that new evidence of “sustained above-trend growth” and new signs of a tight labor market “could justify further tightening of monetary policy. There is,” he said.
The Federal Reserve recently slowed its aggressive monetary policy tightening that had raised its benchmark lending rate to a 22-year high, aiming to curb inflation without pushing the U.S. economy into recession.
Headline inflation, as measured by the Fed’s preferred index, has fallen by more than half since its peak last June, but remains above its long-term target of 2%.
“Inflation remains too high,” Powell said in a speech delayed by climate protesters. “The positive statistics from the last few months give us confidence that inflation is on a sustained decline toward our goal.” This is just the beginning of what we need to build.” .
“It remains to be seen how long these low numbers will persist or where inflation will settle in the coming quarters,” he said, adding that the Fed would proceed “with caution” in its upcoming interest rate meetings.
“The Fed is in no hurry to tighten monetary policy further; a rate hike in November is safely priced in,” EY chief economist Gregory Daco wrote in a note to clients.
US stocks fell following Powell’s comments, ending the day firmly in the red.
Powell said the Fed’s current policy stance was “restrictive” and suggested monetary policy was working to put “downward pressure on economic activity and inflation.”
He said the U.S. economy is “coping with much higher interest rates without difficulty, at least for now.”
“Do you feel that the current policy is too strict? I have to say no,” he added.
Recent data shows that the U.S. economy remains strong, supported by strong consumer spending, even as a tight labor market shows some signs of softening.
Chairman Powell warned that “a range of new and old uncertainties” were complicating monetary policy.
He reiterated earlier comments, saying that the Fed’s future decisions will be made “based on a comprehensiveness of emerging data, the evolving outlook, and the balance of risks.”
“Although the Fed has ended its tightening cycle, our view remains that rate cuts will not occur until June 2024,” EY’s Daco said.
Futures traders currently have a 99% chance the Fed will leave interest rates unchanged on Nov. 1 after its next meeting, according to data from CME Group.
In an unusual step, Powell also addressed the ongoing conflict between Israel and Hamas in Gaza. “Geopolitical tensions are at a critical level, posing significant risks to global economic activity,” he said.
The Fed’s role is to monitor how these developments could affect the economy, he added.
Analysts have expressed concern that the Israel-Hamas war could impact oil production and escalate into a broader regional conflict in the oil-rich Middle East.
Speaking late Thursday, the Philadelphia Fed president expressed a slightly softer, more “dovish” view on interest rate policy.
“We believe we are at a point where we can keep interest rates where they are,” Patrick Harker said at a news conference in Philadelphia.
“I think doing nothing at this point is the same as doing quite a lot,” he said.
“As long as policy interest rates remain restrictive, we will continue to steadily suppress inflation and improve market balance,” he said. –AFP
