Fed Chairman Powell on Rate Hikes
Federal Reserve Chair Jerome Powell reaffirmed the Fed’s hawkish stance on Wednesday during a central banker panel hosted by the European Central Bank in Sintra, Portugal. With the next Federal Open Market Committee (FOMC) meeting slated for July 25-26, Powell emphasized that the Fed is not done curbing inflation and hinted at the possibility of consecutive interest rate hikes. The Federal Reserve paused raising interest rates in June after 10 consecutive rate hikes.
Key Points:
- Stronger than expected growth, a tighter labor market, and higher than expected inflation indicate that current policy may not be restrictive enough.
- Fed officials have not yet decided on the timing and magnitude of additional interest rate hikes.
- Moderate pace of interest rate decisions is expected to continue.
- Minimum of two more interest-rate hikes this year are likely necessary to steer inflation towards the Fed’s 2% target.
- A rate cut is not anticipated in the near future, as it would require significant decrease in inflation over a couple of years.
Hot Take:
Fed Chairman Powell’s remarks indicate that the Federal Reserve is still focused on curbing inflation and may proceed with consecutive interest rate hikes in the near future. Despite pausing the rate hikes in June, Powell believes that the current policy may not be restrictive enough. He emphasized the need for further hikes to steer inflation towards the desired 2% target. However, he also made it clear that a rate cut is unlikely in the near future, as significant decrease in inflation is required over a couple of years. Therefore, it is clear that the Fed is taking a cautious approach towards monetary policy decisions.
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