Rate hike may slow next month, inflation war far from over: Fed chief Jerome Powell

WASHINGTON: The Federal Reserve may slow rate hike “as soon as December”, Fed Chairman Jerome Powell said on Wednesday, while warning the fight against inflation is far from over and key questions remain unanswered, including how high interest rates will eventually need to rise and for how long. long.
“It makes sense for us to moderate the pace of rate hikes when we reach a level of restraint sufficient to reduce inflation. The time to adjust the pace of rate hikes could come as soon as the December meeting,” he said. Powell said in pre-delivery speeches at the Brookings Institution think tank in Washington.
However, in a speech highlighting the work that remains to be done in controlling inflation, Powell said that issue is “much less important than questions about how much we will need to raise rates.” How long will it take to bring inflation under control and how long it will take?” necessary to keep policy in check.”
Although the Fed chief did not disclose his estimated “final interest rate”, Mr. Powell said it could be “slightly higher” than the 4.6% rate suggested by policymakers. in their September prediction. He said containing inflation “will require keeping policy at a restrained level for a while”, a comment that seems counter to market expectations that the US central bank could begin cut interest rates next year as the economy slows.
“We will stay on track until the job is done,” Mr. Powell said, noting that while some data suggests inflation will slow next year, “we have a long way to go. long way to restore price stability… Despite tighter policy and slower growth over the past year, we haven’t seen clear progress in slowing inflation.”
The Fed’s response to the fastest outbreak of the disease US inflation in 40 years is a similar sudden increase in interest rates. With a half percentage point increase expected at its December 13-14 meeting, the central bank will lift the overnight policy rate from near zero in March to 4.25%-4.50 %, the fastest rate change since before. Fed President Paul Volcker is grappling with an even worse price rise.
That has made home mortgages and other forms of credit more expensive for consumers and businesses.
However, it did not cause any significant impact on the US job market, where the current 3.7% unemployment rate has led some policymakers to argue that they can the freedom to tighten interest rates further without much risk.
But it hasn’t had a convincing effect on inflation either, a fact that remains to be seen as how much more the Fed may need to raise rates into what it calls “restricted” territory designed to do so. slow economy.
Powell said that the Fed’s estimates for October inflation suggest their preferred measure remains to about three times the central bank’s 2% target.
‘Long way to go’
Mr. Powell noted that while commodity inflation is easing, housing costs are likely to continue to rise next year, while key price measures for services remain high and the labor market tightens. chop.
“Growth in economic activity has slowed, far below its long-term trend,” Powell said. But for inflation to slow “this needs to be sustained. The bottlenecks in commodity production are easing and commodity price inflation also appears to be easing, and this must continue as well.” ”
But “we are likely to see housing services inflation start to decline towards the end of next year,” he said. Citing data released earlier on Wednesday that showed there are still about 1.7 job openings per unemployed, he said that “so far, we have only seen tentative signs of labor needs.”
“Despite some promising developments, we have a long way to go to restore price stability.”


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