The Fed will be assessing data and the impact of its rate hikes in deciding how to proceed with policy, he said. “The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy,” he said. Powell said on Wednesday that while the Fed has made some progress on bringing down inflation, there’s still a long way to go.
Still, hitting pause on rate hikes is not the same as hitting stop altogether. Powell urged investors at his press conference to focus less on “policy firming” and more on “some” and “may.”īefore the banking crisis, the Fed was fairly certain that more rate hikes would be coming in the future. This is a case of classic Fed speak, where small changes to language have a lot of implied meaning. Policymakers in their statement on Wednesday got rid of prior language that forecast “ongoing increases” to the interest rate and instead wrote that the committee “anticipates that some additional policy firming may be appropriate.” While the Fed is data dependent and future changes to interest rates are “uncertain,” he said, a cut to interest rates this year is not in the central bank’s “baseline expectation.” “In that most likely case, if that happens, participants don’t see rate cuts this year,” he said. Powell said that the central bank anticipates growth will slow and inflation will decline gradually this year and next year. But investors are wrong, said Powell at his press conference on Wednesday. Investors are currently betting that the Fed will cut rates before the end of the year, with interest rates ending 2023 somewhere between a half point and three-quarters of a point lower than where they are now (a range of 4.75% to 5%). So what did we learn from the policy decision, economic projections and Powell’s press conference on Wednesday? Still, Federal Reserve Chair Jerome Powell and policymakers entered their second policymaking meeting of the year confronted by an unusual level of uncertainty as the landscape surrounding the financial system continues to shift. Investors and economists had widely anticipated the quarter-point increase despite the recent meltdown in the banking sector. The Federal Reserve raised interest rates by a quarter percentage point on Wednesday as it attempts to fight stubbornly high inflation while addressing risks to financial stability.
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