Jerome Powell, Chair of the Federal Reserve, proclaimed that he and his colleagues are continuing to work to ensure their policy measures are in line with their 2% inflation target. However, he admitted that they do not have complete faith in having accomplished such a stance. He then highlighted the fact that the risks associated with doing too much or too little have become more evenly matched, permitting the Fed to move forth cautiously.
Federal Reserve Chairman Jerome Powell said Thursday that he and his fellow policymakers are pleased with recent deceleration in inflation, but are not certain they have done enough to maintain the slowing. During a presentation to a worldwide audience at the International Monetary Fund in the nation's capital, Powell mentioned that further action could be necessary in the battle against high prices.
The Federal Open Market Committee is dedicated to achieving a monetary policy stance that will cause inflation to drift to the 2% mark over time; however, the group is not certain it has already attained such a stance, he commented in his prepared text. Powell's speech was briefly disrupted by climate action protestors, but he soon resumed.
Inflation levels remain far above the Fed's prolonged goal, however are much lower compared to their peak in the first portion of 2022. After a series of 11 rate increases, the most aggressive policy since the early 1980s, the benchmark rate established a target range of 5.25%-5.5%. The core personal consumption expenditures price index which the Fed prefers, has decreased to an annual rate of 3.7%, down from 5.3% in February 2022; meanwhile the more broad consumer price index topped out at 9% last June.
Powell declared that inflation is "well above" where the Federal Reserve desires it to be, saying that he and his colleagues are pleased with the progress but realize there is still a long way to go. Stock market prices sank after the speech, with the Dow Jones Industrial Average down roughly 200 points.
In addition, Treasury yields went up after a period of three weeks of declines, primarily caused by a 30-year bond auction that was received poorly. Powell warned speculators who are hoping for rate cuts in the coming year that the Federal Reserve is obligated to its mandate, and will raise rates further if needed. As he has stated in his recent public statements, he reiterated that the central bank will be careful as the risk between doing too much and too little has become equally important.
Overall, the Chairman underscored the progress the economy has made. GDP rose at an impressive 4.9% rate in the third quarter; however he expects growth to decelerate in the coming quarters. Unemployment is still low, though it has gone up by half a percent this year, a sign which is usually connected to economic downturns.
Powell noted that the Federal Reserve will respond to any situation that requires more action, and will be watchful to make sure that any stronger than anticipated growth does not thwart the efforts to minimize inflation. He suggested that improvements of supply chains have aided in lowering inflationary pressures, yet he was unsure of what level of success can be expected from further supply-side developments.
Going further, he spoke on the problems presented by keeping rates near zero, a place which they inhabited prior to the inflation increase. He believes it is too soon to determine if such issues are in the past. Markets are mostly sure the Federal Reserve is through raising rates; futures pricing as displayed by the CME Group predict a less than 10% chance of an extra rate hike at the December 12-13 meeting. Nevertheless, traders anticipate the central bank to cut rates next year, likely in the month of June.
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