Powell: It’s too early to talk about lowering Fed rates

“Our focus now is really on taking our monetary policy stance to one that is tight enough to ensure a return of inflation to our 2% target over time, not on rate cuts.”, Powell said at the press conference after the last Fed meeting, where the central bank raised its short-term rate target by half a percentage point.

Powell also stated that the Fed is not considering any changes to its 2% inflation target nor does it intend to do so in the future. “We are not considering it. We are not going to consider it. Under no circumstances,” he said.

“We are going to maintain our inflation target at 2%. We are going to use our tools to return inflation to 2%”, he stressed.

He also mentioned that the monetary authorities expect the servicing components of inflation to take longer to recede than others, and that this will require higher interest rates to bring headline inflation under control.

“So we may have to raise rates further to get where we want to go.”, Powell said at the press conference after the last meeting of the central bank, in which officials raised their estimates of how much the cost of credit will rise next year.

“And that’s really why we’re writing down those high rates and why we hope they’ll have to stay high for a while.”.

“Welcome reduction”

The Federal Reserve chairman added that recent data showing less pressure on prices is not enough for the central bank to change its inflation outlook even further.

“Inflation data received so far in October and November show a welcome slowdown in the pace of price increases”Powell said at the press conference that followed the announcement of the Fed’s 50 basis point interest rate hike.

“But substantially more evidence will be needed to give confidence that inflation is on a sustained downward path.”, he added.

Source: Reuters