Federal Reserve Chairman Jerome Powell says more evidence is needed that inflation is slowing enough.
Chairman of the Federal Reserve Jerome Powell According to
However, he does not believe the central bank will return to the path of interest rate hikes.
“I would say there's no chance of a rate hike,” Powell said at a press conference on Wednesday.
The Open Market Committee, which decides the central bank's monetary policy, kept its key interest rate unchanged as expected 5.25-5.50 percent remains unchanged. At the July 2023 meeting, the interest rate was hiked to current levels.
Major stock indices rose sharply in the market after the central bank's interest rate decision. By the end of the day, however, the broader S&P 500 index and the tech-focused Nasdaq were both down 0.3 percent. On the other hand, the Dow Jones gained 0.2 percent.
Inflation is stable
In recent months, although the rate of consumer price increases has slowed significantly from the peak in 2022, inflation in the US has continued to be stronger than expected.
In the first quarter of this year, the central bank's preferred PCE price index rose 3.4 percent. PCE core inflation, adjusted for food and energy prices, was 3.7 percent on an annual basis. Inflation accelerated from last year's fourth quarter, when the PCE index was 1.8 percent and core inflation was 2.0 percent.
According to Powell, further evidence of a sufficient slowdown in inflation is needed. Only when members of the Open Market Committee are more confident that inflation will move steadily toward the Fed's target is the time for an interest rate cut.
“Achieving trust takes longer than expected.”
The Fed confirmed the target
In March, Powell estimated, interest rates will be cut until a slowdown in inflation appears more certain. Central bankers' median forecast in March was that interest rates would be cut three times this year by 0.25 percentage points.
Steady inflation, the tightening of the US labor market and the relative strength of economic growth have delayed market expectations of interest rate cuts in the spring.
Powell was asked at the press conference whether the Fed's monetary policy is tight enough to control inflation. According to the CEO, the group is committed to a two percent inflation target.
The market anticipates the first interest rate cut next fall.
