Federal Reserve Chair Jerome Powell on Wednesday warned that Americans can expect more rate hikes.
During testimony before the House Financial Services Committee, Powell warned that getting inflation back down to 2% “has a long way to go” as inflation pressures continue to run high. The Personal Consumption Expenditures price index (PCE) was up 4.4% year-over-year as of April, while core PCE prices were up 4.7%.
The comments come one week after the Fed held its key rate steady for the first time since January 2022. At the time, the Fed signaled that two more quarter-point hikes are likely this year.
“Given how far we’ve come, it may make sense to move rates higher but to do so at a more moderate pace,” Powell said. “Earlier in the process, speed was very important. It’s not very important now.”
What should we expect next from the Fed?
Powell said the Federal Open Market Committee expects to raise interest rates “somewhat further by the end of the year,” although decisions will be made “meeting by meeting.”
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“Reducing inflation is likely to require a period of below-trend growth and some softening in labor market conditions,” Powell said. But restoring price stability “is essential to set the stage for achieving maximum employment and stable prices over the longer run.”
Why was Powell giving testimony?
Powell’s Wednesday testimony kicked off two days of appearances before Congress, where he is set to answer questions about the Fed’s rate hike campaign. He will also appear before the Senate Banking Committee on Thursday.
The meetings are part of the Federal Reserve Board’s semiannual reports to Congress.
What did Powell say about the banking sector?
Despite the turmoil in the banking sector earlier this year, Powell called the banking system “sound and resilient” after the Fed, Treasury Department and Federal Deposit Insurance Corporation stepped in to strengthen public confidence in the banking system.
The recent bank failures “have highlighted the importance of ensuring we have the appropriate rules and supervisory practices for banks of this size,” Powell said. “We are committed to addressing these vulnerabilities to make for a stronger and more resilient banking system.”
