Powell “Fed to decide next rate move, won't be hike”

Powell “Fed to decide next rate move, won't be hike”

U.S. Federal Reserve (Fed) Chairman Jerome Powell said on Jan. 1 (local time) that the Fed's next move on interest rates is unlikely to be a rate hike. He also noted that inflation data has exceeded expectations so far this year, reaffirming his previous stance that it will take longer to gain greater confidence that the Fed has achieved its goal of 2% inflation.

Powell made the remarks at a press conference after the Federal Open Market Committee (FOMC) left its benchmark interest rate unchanged at 5.25 to 5.50 percent per year. “So far this year, economic data have not given us greater confidence (that inflation is headed toward 2%),” Powell said, noting that inflation data in particular have exceeded expectations. “It appears that it will take longer than we had previously anticipated to gain that greater certainty,” he said, adding, “We are prepared to maintain the current level of interest rates for as long as we deem appropriate.”

Powell's comments reaffirmed his remarks at the Washington Forum event on March 16th. However, Powell dismissed fears of further rate hikes, saying he believes the Fed's current monetary policy is tight enough to keep inflation below 2%.

“The evidence suggests that current monetary policy is tight and weighing on demand,” Powell said. “I don't think the next rate change is likely to be a hike,” he said, emphasizing that “our focus is on how long we continue to tighten policy.”

When asked about the absence in the post-FOMC press conference of his March statement that “a rate cut later this year seems appropriate,” he said only that “our rate decision will depend on upcoming data.