Fed Chair Jerome Powell said that if is required, they won’t hesitate to rise interest rates further in order to bring the inflation to its desired target of 2%.
On Thursday, November 9, while speaking at an International Monetary Fund audience in Washington D.C., Fed chair Jerome Powell said that they are closely monitoring the inflation situation in the country.
Powell added that although policymakers feel encouraged by the slowing pace of inflation, they’re still unsure at this point. The Fed has an uphill battle to fight against inflation. Powell said:
“The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved such a stance.”
The speech occurred against the backdrop of inflation, which remains significantly above the Federal Reserve’s long-standing goal but has receded from its peak levels in the first half of 2022. The Federal Reserve executed a series of 11 rate hikes, marking the most aggressive policy tightening since the early 1980s, elevating the benchmark rate from near zero to a target range of 5.25%-5.5%.
These rate increases have coincided with a decline in the Fed’s preferred inflation measure, the core personal consumption expenditures price index, to an annual rate of 3.7% from 5.3% in February 2022. The more widely tracked consumer price index peaked above 9% in June of the previous year.
Fed Chair: Future Rate Hikes Possible amid Growing Inflation
Powell emphasized that despite the challenges, the Federal Reserve can exercise caution as the risks associated with taking either too aggressive or too conservative measures have become more finely balanced. He noted the Fed’s awareness of the increase in Treasury yields. The Fed Chair said:
“If it becomes appropriate to tighten policy further, we will not hesitate to do so. We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening. Monetary policy is generally working the way we think it should work.”
Futures pricing, as per the CME Group, suggests a probability of less than 10% for the FOMC to greenlight a conclusive rate hike at its upcoming meeting on December 12-13. This is in contrast to the committee members’ September projections, which indicated a planned quarter-percentage-point increase by year-end.
Following the speech, stock markets experienced a decline, with the Dow Jones Industrial Average dropping nearly 200 points. Concurrently, Treasury yields, which had been on a downward trend for most of the past three weeks, saw an uptick, largely influenced by a poorly received 30-year bond auction.
On the other hand, the crypto market rally continues to hold strong with altcoins leading the rally. The ETH price has shot by 10% above $2,100 levels as BlackRock files for spot Ethereum ETF.