Federal Reserve Chairman Jerome Powell said in a Wednesday statement that an increase in interest rates should be expected until progress is made on bringing down inflation.
Powell appeared before the House Financial Services Committee on Wednesday and told lawmakers that the Federal Open Market Committee (FOMC) is in agreement that interest rates will likely be raised through the end of the year, according to the prepared remarks. Powell’s statement is a shift from the FOMC’s decision last week to pause interest rate hikes for the first time in 15 months, according to Bloomberg.
“Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” Powell said, according to the prepared remarks. “But at last week’s meeting, considering how far and how fast we have moved, we judged it prudent to hold the target range steady to allow the Committee to assess additional information and its implications for monetary policy.”
Powell also said that the “economy is facing headwinds” due to “tighter credit conditions for households and businesses,” according to the remarks. He continued, saying that they are “likely to weigh on economic activity, hiring, and inflation” and that the “extent of these effects remains uncertain.”
Powell’s warning comes amidst an increase in unemployment rates, which hit 3.7% in May, and the inflation rate remains “well above” 2%, according to the remarks. The Federal Reserve is expected to increase interest rates from approximately 5 to 5.25% up to 5.6% by the end of the year, according to Bloomberg, and Powell noted that decisions will be made “meeting by meeting.”
“My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 percent goal,” Powell said. “We will continue to make our decisions meeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks.”
The Federal Reserve has spent the last two years fighting some of the highest inflation rates the U.S. has seen in four decades, according to the U.S. Bureau of Labor Statistics. Powell said that inflation has “moderated” since last year, but noted the process of getting it back below 2% “has a long way to go.”
“We understand that our actions affect communities, families, and businesses across the country,” said Powell. “Everything we do is in service to our public mission.
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