Federal Reserve Chair Jerome Powell has hinted that the Fed may pause raising interest rates at the Federal Open Market Committee (FOMC) meeting next month. “Having come this far, we can afford to look at the data and the evolving outlook and make careful assessments,” Powell said.
Fed Chair Jerome Powell on Rate Hikes
Federal Reserve Chairman Jerome Powell has hinted that the U.S. central bank may pause its series of interest rate hikes after raising rates 10 times in a row. The federal funds rate increased from near zero a year ago to 5.00%-5.25%, its highest level in 16 years. The latest increase was by 25 basis points in March.
Speaking at a Fed conference in Washington alongside former Fed Chair Ben Bernanke, Powell said: “We’ve come a long way in policy tightening and the stance of policy is restrictive … We’ll be monitoring as we assess the extent to which additional policy firming may be appropriate to return inflation to 2% over time.” Noting that the “assessment will be an ongoing one,” Powell detailed:
As we move ahead meeting by meeting having come this far, we can afford to look at the data and the evolving outlook and make careful assessments.
Powell explained that the current level of the central bank’s benchmark rate, which has an impact on various consumer and business loans, is sufficient to curtail borrowing, spending, and overall economic growth.
“We face uncertainty about the lagged effects of our tightening so far,” the Fed chair stressed, adding that “the risks of doing too much versus doing too little are becoming more balanced.”
Furthermore, Powell highlighted that the recent turmoil in the banking sector, resulting from the recent collapse of three major banks, is likely to lead banks to scale back their lending activities. This reduction in the lending pace could weaken the economy.
Noting that events in the banking sector “are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring, and inflation,” the Fed chair emphasized:
As a result, our policy rate may not need to rise as much as it would have otherwise to achieve our goals … Of course, the extent of that is highly uncertain.
Powell added that the data has continued to support the Fed’s view that “bringing inflation down will take some time.”
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