“A lot more remains to be done to bring back stability in prices,” he added.
Powell’s comments come at a critical moment for the economy, which could head down two very different paths: while there are clear signs that inflation is coming down and growth is continuing, there are signs that business sentiment is weakening, and Higher rates will continue to eat into consumer savings as credit card debt grows.
The Fed has raised interest rates to their highest levels in more than two decades to curb price increases, and it’s still unclear how far that will go. Now that policymakers have raised borrowing costs by more than 5 percent through March 2022, keeping them steady for some time will have an increasingly strong impact on economic growth. In fact, markets have sold off in recent weeks as they digest the notion that rates will remain extremely high for some time.
The Fed chief clarified that the central bank is still more concerned about rising prices than a recession, but added that he and his fellow officials will try to balance that risk with the risk of inflation rising further in the economy. which they can. “Unnecessary damage to the economy.”
Still, he added that high inflation also poses risks, especially to the job market. “Ultimately, monetary policy may be needed to reduce persistently rising inflation from the economy at the high cost of employment,” he said.
Ahead of the Fed’s next rate decision in September, the government will report new monthly data on inflation and jobs, and central bank officials have made clear that incoming information on the economy will guide their next steps.
“We will proceed with caution as we decide whether to further tighten the policy rate or, instead, keep the policy rate steady and await further data,” Powell said.
