In spite of their continued determination to align policy with their target of 2% inflation, Fed Chair Jerome Powell stated that “we are not confident that we have achieved such a stance.”
He emphasized that even with the dangers between doing too little and too much closer to balance, the Fed may still exercise caution.
Chairman of the Federal Reserve Jerome Powell stated on Thursday that while he and other policymakers are encouraged by the rate of inflation coming down, they are not sure if they have done enough to maintain the momentum.
Speaking to an audience at the International Monetary Fund slightly over a week after the central bank decided to keep benchmark policy rates unchanged, Powell indicated that additional work could be ahead in the battle against high prices.
In his prepared address, he stated, “We are not sure that we have reached such a stance of monetary policy. The Federal Open Market Committee is committed to achieving a suitably restrictive posture over time to reduce inflation down to 2 percent.
When the speech is delivered, inflation is still far below its peak levels from the first half of 2022 but still well beyond the Fed’s long-term objective. With 11 rate hikes in a row, the committee tightened policy to the greatest extent since the early 1980s, moving its benchmark rate from near zero to a target range of 5.25% to 5.5%.
The core personal consumption expenditures price index, the Fed’s preferred inflation measure, has decreased to an annual rate of 3.7%, from 5.3% in February 2022 at the same time as those boosts.
Although the jobless rate has increased by half a percentage point this year—a trend typically linked to recessions—unemployment is still low. Stronger than anticipated growth might weaken the fight against inflation and “warrant a response from monetary policy,” according to Powell, who stated that the Fed is “attentive” to this possibility.
He is making these comments as a part of a longer presentation to the Jacques Polak Annual Research Conference. He talked about a variety of policy issues, including the difficulty of maintaining rates close to zero, which was their level before the inflation spike. Powell stated that determining whether zero-rate challenges are “a thing of the past” is “too soon.”
