Since March last year, the central bank has rapidly raised interest rates from near zero to a range of 5.25-5.5 per cent, in an effort to fight the worst inflation in four decades…reports Asian Lite News
US Federal Reserve chairman Jerome Powell has said that despite turning lower over the past few months, inflation is still too high, noting that the central bank is striving to balance the risk of tightening monetary policy too much against the risk of tightening too little.
Shorter-term measures of core inflation over the most recent three and six months show that price growth has slowed to below 3 per cent, but these shorter-term measures are “often volatile,” Powell said on Thursday in a speech before the Economic Club of New York, Xinhua news agency reported.
Twelve-month core PCE (personal consumption expenditure) inflation, the Fed’s preferred inflation gauge, peaked at 5.6 per cent in February 2022 and is estimated at 3.7 per cent through September, he noted.
“In any case, inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” said the Fed chair.
Since March last year, the central bank has rapidly raised interest rates from near zero to a range of 5.25-5.5 per cent, in an effort to fight the worst inflation in four decades.
“The stance of policy is restrictive, meaning that tight policy is putting downward pressure on economic activity and inflation,” said Powell.
The near-term outlook for the economy was generally described as stable or having slightly weaker growth, according to the latest Fed Beige Book, a survey on economic conditions based on information collected from its 12 regional reserve banks, released Wednesday.
Consumer spending was mixed, especially among general retailers and auto dealers, due to differences in prices and product offerings, the Beige Book noted. Banking contacts reported slight to modest declines in loan demand.
Stubbornly high mortgage rates that have remained above 7 per cent for the past two months continue to take a heavy toll on builder confidence, as sentiment levels have dropped to the lowest point since January, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Tuesday.
As policymakers debate whether they need to raise rates one more time later this year, the Fed chair reiterated that the central bank’s work remains a delicate balancing act, adding that the Federal Open Market Committee is “proceeding carefully.”
“A range of uncertainties, both old and new, complicate our task of balancing the risk of tightening monetary policy too much against the risk of tightening too little,” said Powell, highlighting elevated geopolitical tensions.
“Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment. Doing too much could also do unnecessary harm to the economy,” he said.