Fed Chairman Powell Affirms Intent to Control Inflation with Careful Monetary Policy

Jerome Powell, the Chairman of the US Federal Reserve (Fed), recently made a statement regarding the Fed’s willingness to raise interest rates as needed. Powell outlined the Fed’s commitment to maintaining a restrictive monetary policy until they are confident that inflation is moving toward their 2 percent target sustainably.

Following the Fed’s decision to keep the policy rate unchanged at a range of 5.25-5.50 percent, the highest level in 22 years, Powell held a press conference. He emphasized the Fed’s determination to reduce inflation to their 2 percent target, emphasizing the importance of price stability for achieving strong and stable labor market conditions.

Powell acknowledged that monetary policy has significantly tightened since the start of 2022, but its full impact is yet to be realized. He stressed a cautious approach in determining further policy tightening, with decisions based on incoming data and ongoing assessments of economic conditions and risks.

The Chairman mentioned key economic indicators, such as robust economic activity, GDP growth exceeding expectations, and strong consumer spending. However, the housing sector, although showing some improvement, remains below pre-pandemic levels due to high mortgage rates. High interest rates have also affected fixed investments.

Powell noted that the labor market remains tight, but supply and demand imbalances are gradually correcting. Despite some moderation, inflation remains well above the 2 percent target. Powell acknowledged anchored long-term inflation expectations but stated that achieving sustained reductions in inflation would take time.

Regarding inflation concerns, Powell recognized that the current restrictive monetary policy has impacted economic activity, employment, and inflation, with headwinds from tighter credit conditions for households and businesses.

In conclusion, Powell reiterated the Fed’s commitment to a restrictive monetary policy stance to bring inflation down to the 2 percent target. He emphasized a cautious approach to decision-making based on evolving data and risk assessments, with readiness to raise interest rates further when necessary. Most FOMC members anticipate rate hikes in the remaining meetings of the year. Powell underscored the Fed’s primary goal of achieving economic stability.