JACKSON HOLE, Wyoming: The Federal Reserve may need to raise interest rates further to ensure inflation is contained, Fed Chair Jerome Powell said on Friday , nodding both to easing price pressures and the surprising overperformance of the US economy and promising to move"carefully" at upcoming meetings.
"We have tightened policy significantly over the past year. Although inflation has moved down from its peak - a welcome development - it remains too high. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.
Unlike in last year's speech at the closely watched annual conference hosted by the Federal Reserve Bank of Kansas City - a terse warning of more tightening to come - Powell did not warn households of coming"pain" from further policy tightening. But neither did he signal that rate cuts were anywhere close, or nod as some policymakers have done to the need to adjust rates downward once inflation cools more sustainably.
Powell repeated what has become a standard Fed diagnosis of inflation progress - with a pandemic-era jump in goods inflation easing and a decline in housing inflation"in the pipeline", but concern that continued consumer spending on a broad array of services and a tight labor market may make a return to 2 per cent difficult.
"Restrictive monetary policy will likely play an increasingly important role. Getting inflation sustainably back down to 2 per cent is expected to require a period of below-trend economic growth as well as some softening in labor market conditions," Powell said. "This year I think he is demonstrating that he is pleased with how far monetary policy has come and how inflation has been reduced. But he is still holding on tightly to this notion that they are watching it carefully and they still have work to do.”