Powell signals higher interest rates, says inflation fight not over

“Earlier in the process, speed was very important. It is not very important now,” Powell said Wednesday in testimony before the House Financial Services Committee, referring to the pace at which officials lifted rates over the past year, Bloomberg reported.

Responding to a lawmakers’ questions about the Fed’s plans, Powell said that it might make sense to continue moving rates higher in the coming months, but at a more moderate pace and the timing of additional hikes would be based on incoming data.

“Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” Powell said. 

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He noted that “nearly all” participants expected further rate increases would be appropriate by the end of the year.

“Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” he added. “Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions.”

Powell said Fed officials “understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal.”

In its last policy meeting, the Federal Open Market Committee kept the interest rate unchanged in a range of 5% to 5.25%. But Fed officials estimated rates would rise to 5.6% by the end of the year, according to their median projection, implying two additional quarter-point hikes following surprisingly persistent inflation and labor-market strength.

Updated: 22 Jun 2023, 06:59 AM IST