Powell warns inflation still 'too high'
By Frank Prenesti
Date: Friday 25 Aug 2023
(Sharecast News) - US interest rates could still be on the way to battle inflation that is "too high", Federal Reserve Chair Jerome Powell warned on Friday.
"Although inflation has moved down from its peak - a welcome development - it remains too high," Powell said in prepared remarks for his keynote address at the Kansas City Fed's annual retreat in Jackson Hole, Wyoming, stressing that his message was a reiteration of that delivered at the same venue a year ago.
"My remarks this year will be a bit longer, but the message is the same: It is the Fed's job to bring inflation down to our 2 percent goal, and we will do so."
"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." The Fed's inflation target is 2%, well below the current level of 3.2%.
Powell noted the twin risks of doing both too much and too little.
"Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment," he said. "Doing too much could also do unnecessary harm to the economy."
His comments come in the wake of 11 rate hikes that have pushed the Fed's key interest rate to a target range of 5.25%-5.5%, the highest level in more than 22 years.
"We are attentive to signs that the economy may not be cooling as expected," with consumer spending "especially robust" and the housing sector possibly rebounding, Powell added.
The economy continues to grow above trend, Powell said, and if that continues "it could put further progress on inflation at risk and could warrant further tightening of monetary policy".
Reporting by Frank Prenesti for Sharecast.com
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