Powell Plays the Long Game

Powell Plays the Long Game

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  • Federal Reserve Chair Jerome Powell confirmed the likelihood of more interest rate increases until inflation is brought under control. He stated that the recent pause in rate hikes does not indicate the end of tightening measures, and most Federal Open Market Committee participants anticipate further rate increases by year-end. Powell's remarks were part of his regular update on monetary policy to lawmakers.

  • After the recent two-day FOMC meeting, officials projected a total of 0.5 percentage point rate increases by the end of 2023, which suggests two more hikes assuming quarter-point increments. The current benchmark borrowing rate set by the Fed is within the range of 5% to 5.25%. Powell acknowledged that although inflation has eased, it remains significantly above the Fed's 2% target, indicating that more efforts are required from the central bank.

Why it matters

Officials opted to postpone rate hikes this month to observe the impact of previous policy tightening on the economy, considering the lagged effects of monetary policy moves. Powell acknowledged signs of loosening conditions in the labor market, such as increased labor force participation in the 25-to-54 age group and moderating wages, while noting that job openings still surpass available workers.


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