Fed Chair Powell Signals Central Bank Could Hold Interest Rates Steady Next Month
Federal Reserve Chair Jerome Powell hinted Thursday that the central bank may hold interest rates steady next month amid rising long-term bond yields that could curtail economic growth, effectively doing the work of another rate hike.
At the same time, Powell said that an economy and labor market that continue to run hot could prompt the Fed to raise rates again at some point.
“Financial conditions have tightened significantly in recent months, and longer-term bond yields have been an important driving factor in this tightening,” Powell said in a speech at the Economic Club of New York at noon. “We remain attentive to these developments because persistent changes in financial conditions can have implications for the path of monetary policy.”
In a discussion with a moderator following the speech, Powell said of the higher yields, "Sure, that's a tightening. That's what we're trying to achieve."
Asked if that means the Fed doesn't need to lift rates as high, he said, "At the margins, it could. That remains to be seen."
The 10-year Treasury bond yield has shot up to 4.9% from 3.2% in March because of a stronger-than-expected economy that could push inflation higher and a large increase in the supply of Treasuries linked to federal government infrastructure and other spending. That's the highest level since 2007.
“Given the uncertainties and risks, and how far we have come, (the Fed’s policymaking committee) is proceeding carefully,” Powell said.