Fed’s Powell: More Rate Hikes are Likely This Year to Fight Still-High Inflation
WASHINGTON (AP) — With inflation in the United States still excessive, most Federal Reserve officials expect to raise interest rates further this year, Chair Jerome Powell told a House committee Wednesday.
“Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” Powell said on the first of two days of semi-annual testimony on Capitol Hill.
Even so, the Fed last week kept interest rates unchanged after 10 straight hikes so it could take time to gauge how higher borrowing rates have affected the economy, Powell said.
The contrast between the Fed’s stated concern over still-high inflation and its decision to skip a rate hike has heightened uncertainty about its next moves. The hazier messaging suggests that Powell is seeking to balance competing demands from those Fed officials who want to keep raising rates and others who feel the central bank has done enough.
Asked on Wednesday to clarify last week’s messaging, Powell told the House Financial Services Committee that keeping rates level was consistent with the Fed’s increasing focus: Slowing the pace of its hikes in order to avoid raising rates higher than needed to reduce inflation and risk causing a deep recession in the process.
“It may make sense to move rates higher but to do so at a more moderate pace,” Powell said, likening the Fed’s rate hikes to a journey. “As you get closer to your destination, as you try to find that destination, you slow down even further.”
Partisan differences over the Fed’s policies emerged at the hearing, with Rep. Patrick McHenry, the North Carolina Republican who chairs the committee, saying the central bank “must remain committed to eliminating this stealth tax on American workers and families,” referring to inflation. “And I urge you to continue that resolve.”