“It would be premature to conclude with certainty that we have reached a sufficiently restrictive level, or to speculate on when interest rate policy might be eased,” Powell said. “We stand ready to tighten policy further” if that is necessary to combat inflation.
The Fed’s key interest rate is in a range of 5.25 to 5.5 percent, the highest level in more than twenty years. Since March 2022, the Fed has raised interest rates eleven times in an effort to lower skyrocketing inflation.
“While the lower inflation figures in recent months are welcome, progress must continue if we are to achieve our 2 percent target,” the Fed chairman added. The US PCE inflation rate, which is used as an indicator by the US central bank, stood at 3 percent for October, compared to 3.4 percent a month earlier.
The European counterpart of the FED, the European Central Bank or ECB, has also allowed interest rates to rise sharply over the past year and a half. The idea is that higher policy interest rates lead to more expensive loans from the banks and thus slow down the economy. This should reduce demand and thereby cool down inflation. That policy seems to be gradually paying off, but according to Powell, it is still too early for an interest rate cut in the United States. ECB President Christine Lagarde also said that an interest rate cut in Europe will not be immediate.
2023-12-01 16:50:55
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