Federal Reserve Board Chairman Jerome Powell speaks during a news conference after a Federal Open Market Committee meeting on September 20, 2023 at the Federal Reserve in Washington, DC.
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Federal Reserve Chairman Jerome Powell on Friday pushed back on market expectations for aggressive interest rate cuts ahead, calling it too early to declare victory over inflation.
Despite a string of positive indicators recently regarding prices, the central bank leader said the Federal Open Market Committee plans on “keeping policy restrictive” until policymakers are convinced that inflation is heading solidly back to 2%.
“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell said in prepared remarks for an audience at Spelman College in Atlanta. “We are prepared to tighten policy further if it becomes appropriate to do so.”
Markets showed little initial reaction to Powell’s remarks, with major averages mixed on Wall Street and Treasury yields lower.
Expectations that the Fed is done raising rates and will move to an easing posture in 2024 have helped underpin a strong Wall Street rally that has sent the Dow Jones Industrial Average up more than 8% over the past month to a new 2023 high.
Powell’s remarks gave some credence to the idea that the Fed at least is done hiking as the string of rate hikes since March 2022 have cut into economic activity.
“Having come so far so quickly, the FOMC is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced,” he said.
“As the demand- and supply-related effects of the pandemic continue to unwind, uncertainty about the outlook for the economy is unusually elevated,” he added. “Like most forecasters, my colleagues and I anticipate that growth in spending and output will slow over the next year, as the effects of the pandemic and the reopening fade and as restrictive monetary…
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