More hikes needed to beat inflation, says Fed boss Jerome Powell
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More hikes needed to beat inflation: Federal Reserve boss Jerome Powell warns it’s too early to ‘declare victory’
US Federal Reserve Chief Jerome Powell warned that it was too early to “declare victory” in the fight against inflation, even as the central bank slowed the pace of rate hikes.
The quarter-point increase was the latest increase since last spring — but lower than the half-point increase in December and the series of three-quarter point increases in 2022.
Powell said “the disinflationary process has started” but that “a few more rate hikes” are needed.
That raised hopes that an end to the rises would soon be in sight, with the New York S&P 500 recovering to move higher after earlier declines.
US inflation has been falling since reaching a four-decade high of 9.1 percent in June. In December that was still 6.5 percent.
Warning: US Federal Reserve Chief Jerome Powell warned it was too early to ‘declare victory’ in battle against inflation
Powell said, “It would be very premature to declare victory or think we really have this.”
He added that “continued increases” would be appropriate and “substantially more evidence” would be needed to show that inflation is on a downward path.
The Fed is targeting 2 percent inflation and was urged last month by Gita Gopinath, of the International Monetary Fund, to stay on track with rate hikes.
Rate hikes in the US have a global impact because they make debt repayment more expensive for countries and companies that have borrowed in dollars.
They also make dollar-priced commodities like oil more expensive.
The US benchmark interest rate range is now 4.5-4.75 percent. Last March, the range was 0-0.25 percent.
Richard Carter, an analyst at Quilter Cheviot, said: “Investors should not mistake this for the end of the cycle of rate hikes, but as a breather.”
The Bank of England and the European Central Bank are also expected to raise interest rates today.