Inflation is still too high. That’s the sentiment of Federal Reserve Chairman Jerome Powell in his address Thursday at the Economic Club of New York.
While inflation slowed compared to a year ago, the economy is growing faster than the Fed anticipated, Powell said, as he repeated the target of 2% for inflation.
Powell did not indicate whether he was learning toward recommending an interest rate hike at the next Fed meeting in November.
“My colleagues and I are committed to achieving a stance of policy that is sufficiently restrictive to bring inflation sustainably down to 2% over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective,” Powell said at the luncheon.
The Fed has raised its key rate 11 times since March 2022 to about 5.5%, which is the highest level in more than two decades.
If the economic expansion persists, the central bank might have to raise the benchmark rate, he said. But Powell also noted that the Fed may not have to raise rates soon, due to rising long-term bond rates. Financial conditions have tightened in recent months, Powell said.
“A range of uncertainties, both old and new, complicate our task of balancing the risk of tightening monetary policy too much against the risk of tightening too little. Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment. Doing too much could also do unnecessary harm to the economy,” Powell said. “Given the uncertainties and risks, and how far we have come, the Committee is proceeding carefully.”
The Fed is scheduled to meet two more times this year, in November and December.
The spate of rate hikes has resulted in consumers paying more for home, car and credit card loans.