Federal Reserve Chair Jerome Powell said the US central bank will continue to move carefully but won’t hesitate to tighten policy further if appropriate.
“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” Powell said in opening remarks prepared for a panel discussion at an International Monetary Fund conference in Washington on Thursday.
“We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening,” he said.
Powell said policymakers are committed to ensuring interest rates are high enough to return inflation to their 2% target, but added, “we are not confident that we have achieved such a stance.”
The dollar and 10-year Treasury yields added to their advance following the release of Powell’s remarks, while the S&P 500 extended losses.
Shortly after he began speaking, Powell was hustled out of the conference room as a group of about a dozen environmental protesters jumped on stage. Brandishing a banner, they chanted and spoke out for about five minutes before departing.
US central bankers are trying to assess whether they need to take their benchmark policy rate slightly higher, and debating how long they should hold rates at elevated levels. The policy-setting Federal Open Market Committee last week held rates at 5.25% to 5.5% range, the highest level in 22 years.
Inflation has decelerated, but remains above the Fed’s target, at 3.4% for the year through September. Fed officials are set to meet again on Dec. 12-13, and traders are betting that they are at the peak of their hiking cycle and will begin cutting rates next year.
In his speech, the Fed chief said it wasn’t clear how much more inflation progress can be made in the future through supply-side improvements.
“Going forward, it may be that a greater share of the progress in reducing inflation will have to come from tight monetary policy restraining the growth of aggregate demand,” Powell said.
He also suggested the central bank will undertake another review of its policy framework beginning in 2024, after announcing an overhaul in 2020.
“Among the questions, we will consider is the degree to which the structural features of the economy that led to low interest rates in the pre-pandemic era will persist,” Powell said. “With time, we will continue to learn from the experience of the past few years, and what implications it may hold for monetary policy.”
Powell spoke on a panel with Bank of Israel Governor Amir Yaron and IMF First Deputy Managing Director Gita Gopinath.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out our most recent white papers.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by Craig Torres
