Jerome Powell:“Earlier in the process,speed was very important. It is not very important now.”Credit:Bloomberg
“Inflation has moderated somewhat since the middle of last year,” Powell said. “Nonetheless,inflation pressures continue to run high,and the process of getting inflation back down to 2 per cent has a long way to go.”
Fed officials left interest rates unchanged last week following 10 straight increases. But central bankers have been adamant that the decision to hit pause did not amount to a declaration of victory over inflation. Instead,moving more gradually will give policymakers time to assess how well higher rates are working to slow the economy as they try to strike a delicate balance of doing enough to cool growth without doing too much.
“Given how far we’ve come,it may make sense to move rates higher,but to do so at a more moderate pace,” Powell said in response to a lawmaker’s question,explaining that it was like moving from a highway to more local roads. “As you get closer to your destination,as you try to find that destination,you slow down even further.”
“Given how far we’ve come,it may make sense to move rates higher,but to do so at a more moderate pace.”
Fed chair Jerome Powell
Central bankers forecast in their fresh economic projections last week that they will probably raise interest rates to around 5.6 per cent this year,which would amount to two more quarter-point rate increases. Powell said during his news conference following the decision last week that the Fed’s July 25-26 meeting will be “live,” meaning that a rate increase is possible at that gathering.
“I think that’s a pretty good guess of what will happen if the economy performs as about as expected,” Powell said on Wednesday,referring to Fed officials’ forecast for two more rate moves this year.
Powell’s comments prompted a muted pullback in the stock market as investors recalibrated their expectations over the future path of interest rates. Investors are now betting on another quarter-percentage point increase by the Fed by November. That’s still one less than what Fed policymakers forecast last week.