Federal Reserve Chair Jerome Powell indicated on Tuesday that the central bank’s rates are likely to hold steady, emphasizing a delayed decline in inflation. He addressed this during his speech at the annual general meeting of the Foreign Bankers’ Association in Amsterdam. Powell pinpointed the unexpectedly slow reduction in inflation this year, stressing the need to observe the outcomes of current restrictive policy measures before acting further.
“We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected,” Powell said. “What that has told us is that we’ll need to be patient and let restrictive policy do its work.”
The Federal Reserve has maintained a range of 5.25-5.5 percent for its key overnight borrowing rate since July, the highest level in 23 years. Despite market fluctuations triggered by Powell’s comments early in the day, future traders slightly increased the predicted probability of the Federal Reserve’s first rate cut likely to come in September. Powell said it’s likely that rates will remain where they are until inflation cools.
“I don’t think that it’s likely, based on the data that we have, that the next move that we make would be a rate hike,” he said. “I think it’s more likely that we’ll be at a place where we hold the policy rate where it is.”
In its last meeting, the Federal Open Market Committee unanimously voted to maintain interest rates due to the lack of progress in achieving the Fed’s two percent inflation target despite over 10 increases. The Labor Department’s producer price index (PPI) showed a higher-than-expected rise of 0.5 percent for April.
