The U.S. Federal Reserve Chairman Jerome Powell on Wednesday said that further interest rate hikes will be needed to bring inflation down to the central bank’s target of 2.0%.
Powell told the House Financial Services Committee that inflation is still “well above” where it should be and that interest rates will need to move higher to slow the US economy and rein in inflation. “Inflation pressures continue to run high,” he said, “and the process of getting inflation back down to 2% has a long way to go.”
The head of the central bank said that the Fed’s decision to hold off on raising interest rates for the first time in more than a year last week was likely simply a temporary respite rather than an indicator that the Fed is done hiking.
In prepared remarks for testimony to the Congress, Powell said, “nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year.”
To get inflation down, Powell said the economy would have to grow at a slower-than-average rate. He also highlighted that decisions about interest rates would be taken on an as-needed basis, with each meeting being handled independently.
Last week, the Fed left its policy rate unchanged at a range of 5.25% to 5.50%. Powell stated in a press conference after the meeting that U.S. growth and the job market are holding up better than expected under the weight of aggressive monetary policy tightening over the past year, but the central bank remains cautious about whether rates will be raised again.
