Newsman: The Federal Reserve raised interest rates by a quarter percentage point Wednesday, its eighth increase in less than a year as the central bank continues its crackdown on inflation.
In a press conference after the Fed raised interest rates by a quarter of a percentage point, Powell said the central bank’s nearly year-long rate hike campaign isn’t over yet, despite six straight months of easing consumer prices.
The U.S., he said, is merely in the early stages of disinflation, and more belt-tightening is likely in store even after eight consecutive rate hikes by the central bank. And he said Fed officials plan to hold rates at punishingly high levels until price spikes have faded much more extensively.
“We have more work to do,” he said. “We’re going to be cautious about declaring victory and sending signals that we think the game is won.”
The Fed’s main borrowing rate now sits between 4.5 percent and 4.75 percent, up from near zero early last year.
“We’re going to be cautious about declaring victory and sending signals that we think the game is won, because we’ve got a long way to go,” Fed chairman Jerome Powell told reporters.
While the price of some goods — like new and used cars — has started to fall, the Fed is concerned that the price of labor-intensive services may continue to climb. That would make it harder to get inflation back down to the central bank’s target of 2%.
“It’s the early stages of disinflation,” Powell said. “And it’s most welcome to be able to say that. But we just see that it has to spread through the economy and it’s going to take some time.”
The central bank’s rate-setting committee signaled that borrowing costs will increase further, saying rate hikes will be “ongoing.”
Federal Reserve Chair Jerome Powell welcomed signs that inflation has been steadily cooling, but he had a stark warning for Americans: It’s still way too hot.
Powell gave some hints on what the Fed might do. “We are not yet at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate” he said.
“Finding out in six or 12 months that we actually were close but didn’t get the job done, inflation springs back and we have to go back in … This is a very difficult risk to manage, ” Fed Chair Powell said. “We are neither pessimistic nor optimistic.”
