Jerome Powell warns Fed Reserve needs more time to battle stubborn inflation

Federal Reserve Chairman Jerome Powell said Tuesday that a sustained rise in inflation is a sign of the Fed’s “recent data clearly not giving us great confidence” that price increases are under control. He warned that the rate cut would likely be delayed until the second half of this year.

“Recent data clearly does not give us great confidence” that inflation is coming under full control, Powell said during a panel discussion at the Wilson Center, adding, “In fact, it will take more than expected to achieve that confidence.” This indicates that it is likely to take some time.”

“If inflation continues to rise, we can maintain current (interest rates) levels for as long as necessary,” he said.

“The latest inflation report shows that achieving that confidence is likely to take longer than expected,” Federal Reserve Chairman Jerome Powell said on Tuesday. AP

The Fed chairman’s comments mean that absent further evidence that inflation is falling, the Fed will cut rates by less than the three-quarters of a percentage point that officials had expected at its most recent March meeting. He suggested that it is likely to be implemented.

Tuesday’s comments signaled a change from Powell, who told a Senate committee on March 7 that it was “not long” before the Fed had the confidence it needed to cut rates. In a March 20 press conference, Powell appeared to downplay his claims. But his comments on Tuesday further diminished the chances of a rate cut in the coming months.

According to government data over the past few weeks, the inflation rate is Still stubbornly above the Fed’s 2% target And the economy is still growing steadily. The year-on-year inflation rate rose to 3.5% in March from 3.2% in February. In addition, an index showing “core” prices, which excludes volatile food and energy prices, rose sharply for the third straight month.

As recently as December, Wall Street traders were pricing in a rate cut of up to six quarter points this year. Currently, they only expect two rate cuts, with the first coming in September.

Consumer inflation, measured year over year, was most recently reported at 3.5%.

Powell’s comments followed a speech by Fed Vice Chairman Philip Jefferson early Tuesday morning, in which he said the Fed plans to raise its benchmark interest rate, which is at its highest level in decades after 11 rate hikes, by the end of the year. It seems that the outlook has increased that the bank will not cut interest rates three times. It started two years ago.

Mr. Jefferson said he expects inflation to continue to slow this year as the Fed’s key interest rate “remains at its current level.” However, he omitted any mention of the possibility of future interest rate cuts, which he had included in his previous speech in February.

Mr. Jefferson said last month that if inflation continues to slow, it would “probably be appropriate” for the Fed to cut interest rates “at some point this year,” a phrase also used by Mr. Powell. But on Tuesday, neither Mr. Powell nor Mr. Jefferson made a similar reference.

Fed Vice Chairman Philip Jefferson also appears to have raised the prospect that the Fed will not lower its benchmark interest rate three times this year. AP

Instead, Powell said only that the Fed could cut rates “if the labor market weakens unexpectedly.”

Fed officials have responded to recent reports saying the economy remains strong. inflation is undesirably high He emphasized that there is little urgency to lower benchmark interest rates for the time being.

On Monday, the government reported: Retail sales soared Last month saw the latest signs that solid job growth and rising stock and home prices are driving solid household spending. Inflation is likely to remain elevated as strong consumer spending may force some businesses to charge higher prices knowing that many people can afford to pay higher prices. there is.