The US Federal Reserve expects to continue raising interest rates but to slow down the pace of hikes, Fed chair Jerome Powell told a Congressional hearing Wednesday.
“Given how far we’ve come, it may make sense to move rates higher but to do so at a more moderate pace,” he told the House Committee on Financial Services.
Powell’s comments come a week after the rate-setting Federal Open Market Committee (FOMC) voted to hold interest rates steady following 10 consecutive hikes in little more than a year.
“Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” he said Wednesday.
“We judged it prudent to hold the target range steady to allow the Committee to assess additional information and its implications for monetary policy,” he added.
The Fed has already raised its benchmark lending rate by five percentage points since March 2022, from close to zero to a range between 5.0 and 5.25 percent.
But despite these aggressive moves, inflation remains “well above” the Fed’s long-run target of two percent, Powell said Wednesday.
His scheduled appearance before Congress to discuss the Fed’s semiannual report on monetary policy gives policymakers a chance to question the bank’s most senior official at a time of high interest rates and slowing economic growth.
Alongside its interest rate decision on June 14, the Fed also published updated economic forecasts which suggested that another half percentage-point of increases may be needed this year.
The Fed also lifted its 2023 GDP growth projections to 1.0 percent from 0.4 percent in March.
Fed officials’ median inflation expectations for the year nudged down slightly to 3.2 percent, while core inflation expectations, which excludes volatile food and energy prices, rose to an annual rate of 3.9 percent.
Futures traders are assigning a close-to 80 percent probability that the FOMC will vote to raise rates by a quarter percentage-point at its next meeting on July 25-26, according to data from CME Group. — Agence France-Presse