The US Federal Reserve is prepared, if needed, to hike interest rates further in order to bring inflation down to its long-term two-percent target, Fed Chair Jerome Powell said Thursday.
“We know that ongoing progress toward our two percent goal is not assured: Inflation has given us a few head fakes,” Powell told a conference in Washington in prepared remarks.
“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” he added.
Powell’s remarks come just over a week after the US central bank voted to hold its interest rate steady at a 22-year high for the second consecutive meeting, fueling expectations that it was done raising it.
While the Fed’s rate setting committee is “committed” to achieving a sufficiently tight stance of monetary policy, “we are not confident that we have achieved such a stance,” Powell said.
The Fed chair’s comments suggest the US central bank is still concerned about the possibility of a re-acceleration of inflation, which has more than halved since peaking last year, according to the Fed’s favored yardstick.
But despite the Fed’s aggressive monetary tightening, which brought rates to a level between 5.25-5.50 percent, it recently noted that US economic activity remained strong in the third quarter.
It also found that “job gains have slowed in recent months but remain strong, and the unemployment rate has remained low.”
The strong economy has increased the likelihood of a so-called “soft landing,” whereby the Fed succeeds in tackling inflation without plunging the United States into recession.
Speaking on Wednesday, Powell indicated the Fed would proceed cautiously, “allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening.”
Futures traders currently assign a probability of more than 90 percent that the Fed will vote to hold interest rates steady at its next rate meeting in December, according to data from CME Group.
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