Breaking News: Fed Chair Jerome Powell Signals Potential for Two More Interest Rate Hikes
Recent statements from Federal Reserve Chair Jerome Powell indicate the possibility of two additional interest rate hikes before the end of the year. This development comes amid persistent inflation and ongoing economic uncertainty. Powell's remarks, delivered during testimony at the US House Financial Services Committee’s semi-annual monetary policy hearing, suggest a commitment to taming inflation, even in the face of potential economic headwinds.
Powell Reiterates Commitment to Inflation Control
At the May meeting, Jerome H. Powell reiterated that the Federal Reserve will likely raise interest rates at least once more this year because of persistently high inflation. This cautious approach reflects the Fed's determination to bring inflation back to its target range. While the Federal Reserve left rates unchanged recently, citing rising risks of higher inflation and unemployment, the possibility of further increases remains firmly on the table.
Economic Outlook and the Fed's Decision-Making Process
The Fed is not facing any economic trade-off just yet, bolstering officials’ confidence that they can afford to be patient about rate cuts. However, the central bank’s decisions are data-dependent and influenced by a range of factors. Powell emphasized that monetary policy decisions would be based solely on careful, objective, and non-political considerations. He acknowledged that longer-term interest rates are likely to be higher as the economy changes and policy is in flux. In late 2023, the central bank lowered the rate by a percentage point. Currently, the decision leaves the Fed’s benchmark short-term rate at a range of 4.25% to 4.5% for a third straight meeting.
Uncertainty and Potential Consequences
Chairman Jerome Powell focused on uncertainty around tariff policy. This highlights the complexity of the current economic landscape and the challenges facing the Federal Reserve. Some analysts believe Jerome Powell didn’t cut interest rates Wednesday, but he might sometime soon, while others suggest he’s in a no-win situation. The potential consequences of further rate hikes, including slower economic growth and increased unemployment, are being closely watched by investors and policymakers alike.