{"id":25668,"date":"2023-06-21T18:38:54","date_gmt":"2023-06-21T22:38:54","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/fed-chair-jerome-powell-sees-more-interest-rate-increases-to-fight-inflation\/"},"modified":"2023-06-21T18:38:55","modified_gmt":"2023-06-21T22:38:55","slug":"fed-chair-jerome-powell-sees-more-interest-rate-increases-to-fight-inflation","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=25668","title":{"rendered":"Fed Chair Jerome Powell Sees More Interest Rate Increases to Fight Inflation"},"content":{"rendered":"
\n

The Federal Reserve remains narrowly focused on reining in inflation and will likely be raising rates further in the coming months, Chairman Jerome Powell told lawmakers on Wednesday, as he acknowledged that the quest to return the economy to price stability still has \u201ca long way to go.\u201d<\/p>\n

In testimony before the House Financial Services Committee, Powell laid out the Fed\u2019s case for holding rates steady in June, arguing that the decision was made because of the combination of the 5 percentage points of rate hikes so far, the \u201cuncertain lags\u201d with which monetary policy affects the economy, and the potential for tighter credit conditions to slow economic activity.<\/p>\n

\n

But he also made clear more policy tightening is on the way. \u201cWe never used the word \u2018pause,\u2019 and I wouldn\u2019t use it here today,\u201d Powell told lawmakers.<\/p>\n

Instead, Powell suggested that the Fed\u2019s updated forecasts, which were released after the policy meeting last week, offered a reasonable path forward for the central bank this year. Those projections showed that 16 of the 18 members of the policy committee expect another interest-rate hike, and a broad majority expect two more this year. <\/p>\n

The latest median forecast shows officials now see the federal-funds rate hitting 5.6% by the end of the year, up from an expected 5.1% in March.<\/p>\n

\u201cI think that\u2019s a pretty good guess of what will happen if the economy performs about as expected,\u201d Powell said.<\/p>\n

He also noted, however, that the Fed will be making decisions \u201cmeeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks.\u201d <\/p>\n

The Fed chair\u2019s appearance on Capitol Hill\u2014which is mandated as part of a semiannual report on monetary policy\u2014comes as inflation remains more than double the bank\u2019s target even after 10 straight interest-rate increases from the central bank. Core PCE, which is the Fed\u2019s preferred inflation gauge, was up 4.7% year over year in April.<\/p>\n

\u201cInflation has moderated somewhat since the middle of last year,\u201d Powell said. \u201cNonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go.\u201d<\/p>\n

Powell highlighted three economic conditions that will likely need to be in place before price growth can cool significantly: Economic growth will need to be \u201cslower than modest,\u201d supply chain bottlenecks will need to ease up, and labor supply and labor demand will need to rebalance. <\/p>\n

\u201cAll of those things,\u201d he said, \u201care happening much later and much more slowly than we would hope.\u201d<\/p>\n

Some lawmakers focused their questioning on Wednesday on the potential fallout from the Fed\u2019s attempts to rein in inflation. Powell emphasized that the Fed remains committed to its goal of returning inflation to 2% despite the necessary trade-offs, arguing that the long-term payoff will be worth it.<\/p>\n

\u201cPrice stability is the responsibility of the Federal Reserve, and without it, the economy does not work for anyone,\u201d Powell said.<\/p>\n

Asked specifically about whether the Fed considers the impact of its policy moves on low- and moderate-income communities, Powell emphasized that those families are the ones who will most benefit from a return to price stability.<\/p>\n

\u201cWe think that the most important thing we need to do for working people is to get inflation back down under control,\u201d Powell said. \u201cBecause it is people at the lower end of the income spectrum who suffer most immediately and worse from high inflation.\u201d<\/p>\n

Beyond inflation, several lawmakers pressed Powell on the topic of bank regulation and capital requirements in the aftermath of the failure of Silicon Valley Bank and others this spring. Powell largely stayed away from specifics on forthcoming regulatory changes or recommendations. He did, however, acknowledge that Silicon Valley Bank\u2019s collapse made clear that \u201cthere is going to be a need for stronger supervision and also regulation for banks of that size.\u201d<\/p>\n

But he implied that the Fed will likely not be in favor of a one-size-fits-all approach to bank regulation.<\/p>\n

\u201cWe benefit from having banks of all different shapes and sizes in our system,\u201d Powell said. \u201cAnd we want to be careful not to regulate the smaller banks to the point where, really, their business models are challenged for all but the largest banks.\u201d<\/p>\n

Powell will testify before the Senate Banking Committee on Thursday at 10 a.m.<\/p>\n

Write to Megan Cassella at megan.cassella@dowjones.com and Megan Leonhardt at megan.leonhardt@barrons.com.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Federal Reserve remains narrowly focused on reining in inflation and will likely be raising rates further in the coming months, Chairman Jerome Powell told lawmakers on Wednesday, as he acknowledged that the quest to return the economy to price stability still has \u201ca long way to go.\u201d In testimony before the House Financial Services […]<\/p>\n","protected":false},"author":1,"featured_media":25379,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-25668","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nFed Chair Jerome Powell Sees More Interest Rate Increases to Fight Inflation | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The Federal Reserve remains narrowly focused on reining in inflation and will likely be raising rates 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