- Federal Reserve Chairman Jerome Powell said Tuesday that lowering inflation due to high interest rates “may take longer than expected.”
- However, he reiterated that the possibility of a rate hike is low.
- His comments largely echo those he made at a press conference after the Fed meeting earlier this month.
Federal Reserve Chairman Jerome Powell said Tuesday that lowering inflation due to high interest rates “may take longer than expected” and the recent slowdown in the labor market could mean an early rate cut. There was no hint about gender.
“We need to be patient and let the restrictive policies work,” Powell said at a meeting of the Foreign Bankers Association in Amsterdam. “It may take longer than expected for[higher interest rates]to have their effect and reduce inflation.”
However, he reiterated that the possibility of a rate hike is low.
His comments largely echo those he made at a news conference after the Fed meeting earlier this month, where officials kept key short-term interest rates unchanged at 5.25% to 5.5%, a 23-year high.
How many jobs were added in April?
But a recent report showed U.S. employers added 175,000 jobs last month, down from the first quarter’s average of 269,000 a month, pushing the unemployment rate to 3.9%. Some economists said signs of a recession had revived hopes for employment. Early interest rate cuts.
But Powell said Tuesday that the labor market is “very, very strong” and gave no indication that April’s slow but still strong job growth was causing concern among Fed officials. Ta. Powell said in a press conference earlier this month that either a significant drop in inflation or “unexpected” weakness in the labor market could prompt the Fed to cut rates sooner.
Most forecasters expect job growth to gradually slow as high interest rates and the post-pandemic employment boom fade.
How many rate cuts are expected in 2024?
At the end of March, the Fed still tentatively expected to cut interest rates three times this year, with the first rate cut expected in June, after inflation eased rapidly in the second half of last year. But after reports last month showed that inflation remained high in March for the third straight month, Fed officials said they were likely to keep interest rates high for an even longer period of time. Stated.
“It’s notable that we haven’t seen any further progress on inflation in the first quarter,” Powell said on Tuesday.
What is the current inflation rate?
In March, the Fed’s recommended overall annual inflation rate rose to 2.7% from 2.5%, well below the 40-year high of 7.1% set for mid-2022, but above its 2% target. The core value, which excludes volatile food and energy items, was flat at 2.8%, down from a peak of 5.6% in 2022.
Reports on Tuesday morning also indicated that wholesale prices rose more than expected in April. However, Powell called the report “mixed” and suggested there were some encouraging downward revisions to the previous month. Economists said price increases have slowed in categories that influence consumer inflation.
Before Powell’s remarks, futures markets had indicated the Fed would cut interest rates by a quarter of a percentage point in September and December.
At the same time, Chairman Powell did not rule out a rate hike, but reiterated that it was unlikely.
“I think it’s unlikely that the next step will be a rate hike,” he said. Chairman Powell said he expected the Fed to “likely keep policy rates where they are” until inflation resumes falling more rapidly.
He added: “My confidence in that is not as high as it used to be.”
