Powell: Fed to keep rates elevated ‘for some time’

Central bank chair also says increases could ease as soon as mid-December

Jerome Powell, the Federal Reserve chair, said the central bank could slow its interest rate increases at its meeting next month — even as he emphasized that policymakers have more work to do to ensure that rapid price inflation will return to normal.

“The time for moderating the pace of rate increases may come as soon as the December meeting,” Powell said, referencing the Dec. 13-14 gathering. Still, Powell said in remarks that “ongoing increases will be appropriate” and that what matters most is the level rates ultimately rise to and how long they remain elevated.

The Fed chair acknowledged that inflation has shown hopeful signs of slowing, but he also warned against reading too much into one month of data. He emphasized that wage growth remains too rapid to allow price increases to ease back to the Fed’s 2% annual goal.

Given that, he underlined repeatedly that central bankers will need to keep lifting interest rates — probably by more than they had predicted as recently as September — to ensure that they get the job done.

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said.

The Fed has lifted interest rates from near-zero as recently as March to a range of 3.75% to 4% at its meeting this month. Its past four rate moves have come in threequarter-point increments — adjustments not previously made since 1994. Central bankers have been clear that they think it would be wise to slow the pace, dialing back to a half-point rate move as soon as their next meeting.

Moving less quickly will allow the Fed to keep up its battle against inflation while giving policymakers more time to see how the substantial rate moves they have already made are playing out. While interest rate changes work promptly to slow the housing market, their full effects take months or years to play through the economy.

But Powell and his colleagues have been walking a careful line as they prepare investors for a slowdown: They do not want to signal that they are giving up in their battle against rapid price increases. If investors believe that the Fed is dialing back its plans and asset prices rise in a sign of investor relief, money could become cheaper and easier to borrow, undoing some of the monetary restraint that the central bank has ushered in.

Powell in his remarks repeatedly emphasized the Fed is far from stopping its campaign to vanquish inflation.

“It is likely that restoring price stability will require holding policy at a restrictive level for some time,” he said. “We will stay the course until the job is done.”

The Fed chair pushed back on any notion that a recent moderation in price increases is a sign that inflation will continue to cool.

“Down months in the data have often been followed by renewed increases,” he said. And while many economists expect inflation to moderate next year, “forecasts have been predicting just such a decline for more than a year, while inflation has moved stubbornly sideways.”