Federal Reserve Chair Powell Hints at Possible Pause in Interest Rate Hikes – Federal Reserve Chair Jerome Powell has indicated that there is a possibility of the Federal Reserve pausing its efforts to raise interest rates during the upcoming Federal Open Market Committee (FOMC) meeting. Powell stated that given the progress made so far, it is now feasible to carefully evaluate the available data and the evolving economic outlook before making any further decisions.
Speaking at a Fed conference in Washington alongside former Fed Chair Ben Bernanke, Powell said: “We’ve come a long way in policy tightening and the stance of policy is restrictive. We’ll be monitoring as we assess the extent to which additional policy firming may be appropriate to return inflation to 2% over time.” Noting that the “assessment will be an ongoing one.” Powell detailed: “As we move ahead meeting by meeting having come this far, we can afford to look at the data and the evolving outlook and make careful assessments.”
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Powell clarified that the existing level of the central bank’s key interest rate, which affects different types of loans for consumers and businesses, is adequate to restrain borrowing, spending, and overall economic expansion. “We face uncertainty about the lagged effects of our tightening so far,” the Fed chair stressed, adding that “the risks of doing too much versus doing too little are becoming more balanced.”
Moreover, Powell emphasized that the banking industry’s recent upheaval caused by the collapse of three prominent banks is expected to prompt a decrease in lending activities by banks. Such a decline in the pace of lending may have a detrimental impact on the economy. Noting that events in the banking sector “are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring, and inflation.”
The Fed chair emphasized: “As a result, our policy rate may not need to rise as much as it would have otherwise to achieve our goals. Of course, the extent of that is highly uncertain.” Powell added that the data has continued to support the Fed’s view that “bringing inflation down will take some time.”