Federal Reserve Chairman Jerome Powell said on Wednesday that more rate hikes are likely at future bank meetings, expecting inflation not to return to the 2 percent target before 2025.
Powell did not rule out raising the cost of borrowing at the policy-setting meeting scheduled for the end of July.
Powell added, in a conference of the European Central Bank, “We have come a long way” with regard to raising interest rates, noting that the suspension this month came in order to absorb the impact of the cycle of raising interest rates on the economy.
He continued, saying that future monetary policy measures will be driven by the performance of the economy, noting that “the only thing we decided is not to raise interest rates at the June meeting.”
“I wouldn’t rule out taking such action in back-to-back meetings at all,” he added. “It is clear that the committee believes there is more work to be done, and that more rate hikes would probably be right” sometime during the year.
The date for the next meeting of the US Central Bank’s Open Market Committee to set interest rates is July 25-26.
Powell said that the rapid pace of rate hikes was appropriate when inflation was so high and the stance of monetary policy was inconsistent with it, but that policy is now closer than it should be.
He also mentioned that the US economy has remained strong so far in the face of the Federal Reserve’s actions, and the labor market has performed surprisingly well.
“It’s a positive thing that we were able to raise interest rates by 500 basis points with the expectation going forward, and we still have a very strong job market,” he added.
The US central bank chief did not rule out the possibility that the bank’s actions, which aim to return the inflation rate to two percent, would lead to some economic troubles.
“The least likely case is that we find our way to a better balance without a really sharp downturn,” Powell said.
And he added that there is also “a high possibility of an economic downturn, but it is not the most likely case.”
He added that efforts to bring inflation back to the target level will take a long time, and “I don’t expect us to go back to two percent (rate) this year or next,” but that it is likely to happen in 2025.
2023-06-28 17:13:18
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