After imposing the fastest increases to interest rates since the 1980s, Federal Reserve Chair Jerome Powell said that the central bank may be ready to scale back the pace of rate hikes as soon as December
Nov 30 - Federal Reserve Chair Jerome Powell on Wednesday said it was time to slow the pace of coming interest rate hikes while also signaling a protracted economic adjustment to a world where borrowing costs will remain high, inflation comes down slowly and the United States remains chronically short of workers.
"We wouldn't...try to crash the economy and then clean up afterward," Powell said, with policymakers hoping not to "overtighten...because we think that cutting rates is not something we want to do soon. That's why we're slowing down and going to try to find our way to what that right level is" that lowers inflation over time.
"I think for now we have to assume," that labor supply won't rebound, Powell said. "We have to do what it takes to restore balance in the labor market to get back to 2% inflation...really just by slowing job growth rather than putting people out of work." But progress has been slower than expected, with China in particular now undergoing successive lockdowns that have made it a less secure source of goods, and U.S. labor force participation still depressed.Federal Reserve Chair Jerome Powell holds a news conference in Washington, U.S., November 2, 2022. REUTERS/Elizabeth Frantz/File Photo
While the Fed chief did not indicate his estimated "terminal rate," Powell said it is likely to be "somewhat higher" than the 4.6% indicated by policymakers in their September projections. He said curing inflation "will require holding policy at a restrictive level for some time," a comment that leaned against market expectations the U.S. central bank could begin cutting rates next year as the economy slows.
That has not, however, had a convincing impact yet on inflation. Powell said Fed estimates of inflation in October showed its preferred measure still rising at about triple the central bank's 2% target.
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