Fed Chairman Jerome Powell kicked off his news conference by noting that more than a year’s worth of interest rate hikes haven’t worked their way through the economy yet.
“We have raised our policy interest rate by 5 percentage points, and we’ve continued to reduce our security holdings at a brisk pace. We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” he said.
“We have been seeing the effects of our policy tightening and demand in the most interest rate sensitive sectors of the economy, especially housing and investment,” he later added. “It will take time however, for the full effects of monetary restraint to be realized, especially on inflation.”
Fed will consider ‘cumulative’ impact of hikes at future meetings
The Federal Reserve will consider the impact that its previous rate hikes are having on the economy when deciding whether or not to hike rates again in the future, Chair Jerome Powell said.
“Nearly all committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. But at this meeting, considering how far and how fast we’ve moved, we judged it prudent to hold the target range steady. ... The committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy effects economic activity and inflation, and economic and financial developments,” Powell said.
Powell expects July meeting to be ‘live’
Powell said that, while a decision about next month’s policy move hasn’t yet been made, central bank officials discussed it.
“We didn’t we didn’t make a decision about July,” Powell told reporters after the Fed held rates steady but signaled more rate hikes may be coming later this year. “Of course it came up in the in the meeting from time to time, but really the focus was on what to do today. I would say … two things: One, a decision hasn’t been made. Two, I do expect that it will be a live meeting.”
Powell sees progress against inflation
Powell expressed optimism about the fight against inflation, saying that various factors are showing progress.
“I would almost say that the conditions that we need to see in place to get inflation down are coming into place,” the central bank leader said at his post-meeting news conference.
He further defined that progress as “growth meaningfully below trend. That would be a labor market that’s loosening. It will be goods, pipelines, getting healthier and healthier … The things are in place that we need to see. But the process of that actually working on inflation is going to take some time.”
Powell also noted that he expects disinflation to come from the housing market, where he expects new rental lease prices to come down.
Powell declines to call June decision a ‘skip’
Powell was reluctant to describe the decision to hold rates steady as a “skip” during Wednesday’s press conference.
“The skip — I shouldn’t call it a skip — the decision,” Powell said at one point.
However, he did not push back on a question that described the decision as a “skip.”
On rate cuts
Powell said it will be appropriate to cut rates at such time as inflation is coming down really significantly. And we’re talking about a couple of years out.
“I think, as anyone can see, not a single person on the committee wrote down a rate cut this year -- nor do I think it is at all likely to be appropriate if you think about it. Inflation has not really moved down. It has not reacted much to our existing rate hikes. We’re going to have to keep at it.”
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