(Finance) – The disinflation process has begun: “it is in its initial stages and the road is long”. The says it Fed chairman Jerome Powellduring a debate at the Economic Club of Washington, emphasizing that more interest rate increases will probably be needed and confirming the key message launched by the Fed after last week’s board meeting (FOMC).
To the Federal Reserve”we think more rate hikes will be needed and that they will have to remain at restrictive levels for some time” and last Friday’s data on the labor market “were certainly strong, higher than our expectations” and “demonstrate why the disinflationary process will take time” and can be “bumpy” .
The governor explained that the Federal Reserve has no plans to change its inflation target to 2%. A 2% inflation rate “is a global standard”, it will take until 2024 for inflation to fall close to 2%. 2023, however, “will be a year of significant price declines”.
Returning to rates, Powell reiterated that the ongoing interest rate hikes “are appropriate” and that in light of recent labor market data “the Fed still has a lot of work to do”.
The US labor market created more than 500,000 jobs in January, well beyond analysts’ expectations, with the unemployment rate down to its lowest since the late 1960s.