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Federal Reserve Chair Jerome Powell warned on Friday that more hikes in interest rates could be yet to come and called for continued vigilance in the fight against inflation.
“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. “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.”
Last year at Jackson Hole, Powell warned that “some pain” was likely as the Fed continues it’s efforts to fight inflation in an attempt to get inflation back down to the Fed’s 2% target. At the time of Powell’s warning last August, the Fed had just raised rates to a benchmark of 2.25% to 2.50%. In July 2023, the Fed raised rates by another quarter percentage, bringing the rate to 5.25%-5.5%.
Despite inflation beginning to cool, Powell warned that it’s too soon to declare victory.
“The lower monthly readings for core inflation in June and July were welcome, but two months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said.
Powell warned that “Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to bring more persistent inflation from the economy at a high cost to employment,” he said. He also acknowledged that “Doing too much could also do unnecessary harm to the economy.”
“As is often the case, we are navigating by the stars under cloudy skies,” he added.
The Fed is scheduled to meet again September 19-20, 2023.
