Jay Powell is set to defend the Federal Reserve’s decision to forgo an interest rate rise at its recent policy meeting, but will signal that the battle against inflation is not yet finished, in remarks prepared for a high-stakes congressional appearance on Wednesday.
Powell, chair of the US central bank, will tell lawmakers on the House financial services committee that skipping a rate rise last week was “prudent” given “how far and how fast” the Fed has lifted its benchmark rate since March 2022. In just over a year, the federal funds rate has risen from near-zero to a range of 5 to 5.25 per cent.
The “full effects of monetary restraint” will take time to be realised, Powell will say in opening remarks on the first of two days of semi-annual testimony to Congress. He will also highlight that the tightening in credit standards following the collapse of Silicon Valley Bank in March could cause “headwinds” for the world’s largest economy.
However, Powell will hint that the central bank still has more to do in terms of squeezing the economy in order to get inflation under control.
“Inflation has moderated somewhat since the middle of last year,” he will say. “Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2 per cent has a long way to go.”
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Source: www.ft.com
ENB
Sandstone Group
