(Finance) – “Monetary policy affects the economy and inflation with uncertain lags and the full effects of our rapid tightening so far are yet to be felt. Therefore, it makes sense to moderate the pace of our rate hikes as we get closer to the level of containment that will be sufficient to reduce inflation“. This was stated by the chairman of the Federal Reserve, Jerome Powellin a speech in Washington DC at the Hutchins Center on Fiscal and Monetary Policy.
“Time to moderate the pace of rate hikes it could arrive as early as the December meeting”, he added, thus suggesting that the next FED rate hike will fall to 50 basis points.
“Given our progress in tightening policy, the timing of that moderation is far less significant than questions about how much more we will need to raise rates to control inflation and how long it will take to keep policy at a tightening level,” he continued. – IS it is probable that the restoration of price stability will require the maintenance of a restrictive policy for some time. History strongly warns against a premature easing of policy. We will stay on course until the job is done.”
“It seems to me the final level of interest rates is likely to be a little higher than expected at the time of the September meeting and summary of economic projections,” he added in another passage.
Speaking of the inflation outlook, he noted that inflation forecasts from private sector forecasters or FOMC participants “generally show a significant decline over the next year.” “But forecasts have predicted just such a decline for more than a year, while inflation has stubbornly moved sideways,” she underlined. The truth is that the path of inflation remains highly uncertain“.
Analyzing the performance of the economy, he said that “the bottlenecks in the production of goods are easing and the inflation of the prices of the goods also seems to decrease, and this too must continue. Inflation of housing services will probably continue to climb into next year as well, but if inflation on new leases continues to fall, we will likely see housing services inflation start to decline later in the year.Finally, the labor market, which is particularly important for the Inflation in basic services excluding housing shows only tentative signs of rebalancing and wage growth remains well above levels that would be consistent with 2% inflation over time. Despite some promising developments, we still have a long way to go to restore price stability“.