Fed Chair Powell on Interest Rate Hike: “We still have some ways to go.”

By | November 2, 2022

Fed Chair Powell: ”Today, the FOMC raised our policy interest rate by 75 basis points and we continue to anticipate that ongoing increases will be appropriate…Restoring price stability will likely require maintaining a restrictive stance of policy for some time.” He added that the U.S. economy has slowed significantly from last year’s rapid pace and ”at some point…it will become appropriate to slow the pace of increases…We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.”

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Good afternoon My colleagues and I are strongly Committed to Bringing inflation back Down to our two percent goal We have both the tools that we need and The resolve it will take to restore Price stability on behalf of American Families and businesses Price stability is the responsibility of The Federal Reserve and serves as the Bedrock of our economy Without price stability the economy does Not work for anyone in particular Without price stability we will not Achieve a sustained period of strong Labor market conditions that benefit all Today the flomc raised our policy Interest rate by 75 basis points and we Continue to anticipate that ongoing Increases will be appropriate We are moving our policy stance Purposefully to a level that will be Sufficiently restrictive to return Inflation to two percent In addition we’re continuing the process Of significantly reducing the size of Our balance sheet Restoring price stability will likely Require maintaining a restrictive stance Of policy for some time I will have more to say about today’s Monetary policy actions after briefly Reviewing economic developments [Music]

The US economy has slowed significantly From last year’s rapid pace Real GDP Rose at a pace of 2.6 percent Last quarter but is unchanged so far This year Recent indicators point to modest growth Of spending and production this quarter Growth in consumer spending has slowed From last year’s rapid Pace in part Reflecting lower real disposable income And Tighter Financial conditions Activity in the housing sector has Weakened significantly largely Reflecting higher mortgage rates Higher interest rates and slower output Growth also appear to be weighing on Business fixed investment Despite the slowdown in growth the labor Market remains extremely tight with the Unemployment rate at a 50-year low job Vacancies still very high and wage Growth elevated Job gains have been robust with Employment Rising by an average of 289 000 jobs per month over August and September Although job vacancies have moved below Their highs and the pace of job gains Has slowed from earlier in the year the Labor market continues to be out of Balance With demand substantially exceeding the Supply of available workers The labor force participation rate is

Little change since the beginning of the Year Inflation remains well above our longer Run goal of two percent over the 12 Months ending in September total pce Prices rose 6.2 percent excluding the Volatile food and energy categories Core pce prices Rose 5.1 percent And the recent inflation data again have Come in higher than expected Price pressures remain evident across a Broad range of goods and services Russia’s war against Ukraine has boosted Prices for energy and food and has Created additional upward pressure on Inflation Despite elevated inflation longer-term Inflation expectations appear to remain Well anchored as reflected in a broad Range of surveys of households Businesses and forecasters as well as Measures from financial markets But that is not grounds for complacency The longer the current bout of high Inflation continues the greater the Chance that expectations of higher Inflation will become entrenched The fed’s monetary policy actions are Guided by our mandate to promote maximum Employment and stable prices for the American people My colleagues and I are acutely aware That high inflation imposes significant Hardship it is as it erodes purchasing

Power especially for those least able to Meet the higher costs of Essentials like Food housing and transportation We are highly attentive to the risks That high inflation pods poses to both Sides of our mandate and we’re strongly Committed to returning inflation to our Two percent objective At today’s meeting the committee raised The target range for the federal funds Rate by 75 basis points And we are continuing the process of Significantly reducing the size of our Balance sheet which plays an important Role in firming The Stance of monetary Policy With today’s action we’ve raised Interest rates by three and three Quarters percentage points this year We anticipate that ongoing increases in The target range for the federal funds Rate will be appropriate in order to Attain a stance of monetary policy that Is sufficiently restrictive to return Inflation to two percent over time Financial conditions have tightened Significantly in response to our policy Actions and we are seeing the effects on Demand in the most interest rate Sensitive sectors of the economy such as Housing It will take time however for the full Effects of monetary restraint to be Realized especially on inflation

That’s why we say in our statement that Determining the pace of future increases In the target range we will take into Account the cumulative tightening of Monetary policy and the lags with which Monetary policy affects the economic Activity and inflation At some point As I’ve said in the last two press Conferences it will become appropriate To slow the pace of increases as we Approach the level of interest rates That will be sufficiently restrictive to Bring inflation down to our two percent Goal There is significant uncertainty around That level of interest rates Even so we still have some ways to go And incoming data since our last meeting Suggests that the ultimate level of Interest rates will be higher than Previously expected Our decisions will depend on the Totality of incoming data and their Implications for the outlook for Economic activity and inflation We will continue to make our decisions Meeting by meeting and communicate our Thinking as clearly as possible We’re taking forceful steps to moderate Demand so that it comes into better Alignment with Supply our overarching Focus is using our tools to bring Inflation back down to our two percent

Goal and to keep longer term inflation Expectations well anchored Reducing inflation is likely likely to Require a sustained period of below Trend growth and some softening of labor Market conditions Restoring price stability is essential To set the stage for achieving maximum Employment and stable prices in the Longer run The historical record cautioned strongly Against prematurely loosening policy we Will stay the course until the job is Done To conclude we understand that our Actions affect communities families and Businesses across the country Everything we do is in service to our Public mission We at the FED will do everything we can To achieve our maximum employment and Price stability goals Thank you and I look forward to your Questions

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