The chairman of the Federal Reserve, Jerome H. Powell, is set to tell House lawmakers that the United States is still “long gone” from low and stable inflation after 15 months of the central bank’s campaign to cool and taper the economy. way” away from a price hike.
set for mr powell testify first At 10 a.m. on the House Financial Services Committee, he will explain to lawmakers that the labor market remains very tight and inflation — while it has come down from its peak last summer — is still very high. In light of this, the Fed could raise interest rates well above their current level of 5 percent.
“Inflation has come down somewhat since the middle of last year,” Mr. Powell will say, according to the text of his prepared remarks. “Nevertheless, inflationary pressures continue to remain high, and the process of bringing inflation back to 2 per cent has a long way to go.”
Fed officials kept interest rates unchanged after 10 consecutive hikes last week. But central bankers have been adamant that the decision to pause did not amount to declaring victory over inflation. Instead, moving more slowly will give policymakers time to assess how well higher rates are working to slow the economy as they strike a balance sufficient to calm growth without doing too much. Let’s try.
“Given how far and how fast we have moved, we made the prudent decision to keep the target range constant,” Mr Powell will tell lawmakers on Wednesday. Still, he would add that “almost all” voting Fed officials “expect it to be appropriate to raise interest rates some more by the end of the year.”
Central bankers updated their forecast economic projections Last week that they would probably raise interest rates this year to about 5.6 percent, which would amount to two more quarter-point rate hikes. Mr. Powell said during his news conference after the decision last week that the Fed’s July 25-26 meeting would be “live,” meaning a rate hike was possible at that meeting.
investors only expect Based on market pricing, the Fed to make another rate hike before holding them steady through the rest of the year, though significant uncertainty remains around that forecast – markets place some constraints on higher rates, and from the end Few constraints on first rate cut of 2023.
The Fed will need to assess how much the economy is slowing, and whether that is likely to be enough to bring inflation back to their 2 percent target over time. Overall growth and the housing market have cooled through 2021, but consumption and even home prices have shown signs of strength recently and hiring remains bullish.
“We are seeing the effect of our policy tightening on demand in the most interest rate-sensitive sectors of the economy,” Mr. Powell will tell lawmakers. “However, the full effects of monetary easing will take time to be realised, especially on inflation.”