Jerome Powell stands firm on 2% inflation target, says Fed will raise rates if needed

Officials raised their benchmark rate last month to a range of 5.25 per cent to 5.5 per cent, a 22-year high, after skipping a rate increase at their June meeting. Their most recent projections had one more rate increase penciled in this year.

Powell signalled Friday that policy has shifted to a more deliberative phase where risk-management is now “critical.”as expected, saying recent readings on economic output and consumer spending have been strong. The economy grew at a 2.4 per cent annualized pace in the second quarter, a surprisingly robust reading that prompted many economists to boost forecasts for the third quarter and reconsider odds of a recession.

“Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said. He also pushed back on speculation that the central bank could raise its inflation target, an idea that has been hotly debated mostly by academics in recent months. “Two per cent is and will remain our inflation target,” he said.Article contentsince reaching a four-decade high last year, though it remains above the Fed’s 2 per cent goal.

Fed officials have said they’re expecting to keep rates in restrictive territory until they have concrete signs that inflation is on its way toward their 2 per cent goal, but that’s a much more subjective strategy that may lead to more open disagreements among policymakers.

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Powell Signals Fed Will Raise Rates If Needed, Keep Them HighFederal Reserve Chair Jerome Powell said the US central bank is prepared to raise interest rates further if needed and intends to keep borrowing costs high until inflation is on a convincing path toward the Fed’s 2% target.
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