Powell says he will ‘keep pushing’ until inflation comes down
Federal Reserve Chair Jerome Powell, in his most hawkish remarks to date, said the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat.
“What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that,” he said Tuesday during a Wall Street Journal live event. “If that involves moving past broadly understood levels of ‘neutral,’ we won’t hesitate at all to do that.”
The Fed chair repeatedly stressed the need to curb the hottest inflation in decades during the roughly 35-minute interview, calling price stability “the bedrock of the economy” and acknowledging that some pain in achieving this — including a slight rise in the unemployment rate, was a cost worth paying in order to achieve it.
Powell and his colleagues raised interest rates by a half point at their meeting earlier this month and the chair said two similar moves were on the table in June and July. He repeated that guidance Tuesday, noting that “if the economy performs as we expect, then that’s something that will be on the table.” The target for their benchmark rate currently stands in a 0.75% to 1% range.
US stocks regained session highs as investors weighed the comments from Powell, while Treasury yields climbed, led by more policy-sensitive shorter-dated tenors.
“I think it was more hawkish,” said Derek Tang, an economist at LH Meyer, a policy analysis firm in Washington. “He is suggesting that this phase of 50s will last for longer. There was a suggestion that it could be more than two 50 basis point hikes.”
US consumer prices rose 8.3% in the 12 months through April, according to Labor Department figures published May 11. That was slightly lower than the 8.5% increase in the 12 months through March, which marked the highest inflation rate in 40 years.
Domestic demand remains strong even though financial conditions have tightened after a number of Fed officials have said they want to raise rates to neutral by year-end, which they see lying around 2.5%.