Federal Reserve Chairman Signals More Interest Rate Hikes

Powell’s Remarks at European Central Bank Conference

Federal Reserve Chairman Jerome Powell said on Wednesday that more interest rate hikes were likely at the bank’s upcoming meetings, adding that he did not rule out an increase in borrowing costs at a policy-setting meeting scheduled for late July.

Progress in Raising Interest Rates

“We’ve come a long way” on raising interest rates, Powell said at a European Central Bank conference, noting that this month’s suspension was in place to absorb the impact of the rate hike cycle on the economy.

He continued by saying that future monetary policy action will be determined by the performance of the economy, noting that “the only thing we have decided is not to raise interest rates at the June meeting,” according to Reuters.

Potential Rate Hikes in Successive Meetings

“I wouldn’t rule out such action at all in successive meetings,” he added. “It’s clear that the committee thinks there’s still more work to be done, and that further rate hikes would probably be the right thing to do.” somewhere during the year.

Upcoming Meeting of the US Central Open Market Committee

The date for the next meeting of the US Central Open Market Committee to set interest rates is July 25 and 26.

Current State of the US Economy

Powell said a quick pace of rate hikes was appropriate when inflation was so high and the monetary policy stance inconsistent with it, but that policy is now closer than it should be.

He also mentioned that the US economy is still strong despite the actions of the Fed, and the labor market is doing surprisingly well.

“On the positive side, we were able to raise interest rates by 500 basis points with an eye to the future, and we still have a very strong job market,” he added.

Challenges in Returning Inflation to Target

The head of the US Central Bank did not rule out that the bank’s actions aimed at returning the inflation rate to 2% would lead to some economic problems.

“The least likely case is that we will find a way to a better balance without a really sharp decline,” Powell said. And he added that there is also “a high probability of an economic downturn, but this 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 do not expect that we will return to (rate) 2% this year or next”, but that it will probably happen in 2025.