Federal Reserve Chairman Jerome Powell cautioned that interest rates may rise higher than initially anticipated by central bank policymakers.
Powell acknowledged that recent economic data had been stronger than expected, leading to the conclusion that interest rates would ultimately be higher than previously anticipated. He further noted that if the data indicated the need for faster tightening, the Federal Reserve would be ready to increase the pace of rate hikes.
He said, “We strongly committed to returning inflation to our 2% goal. Over the past year, we have taken forceful actions to tighten the stance of monetary policy. We have covered a lot of ground, and the full effects of our tightening so far are yet to be felt. Even so, we have more work to do. Our policy actions are guided by our dual mandate to promote maximum employment and stable prices. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of labor market conditions that benefit all.”
Powell stated that it will take time for the full effects of monetary restraint to be realized, especially on inflation. “Our overarching focus is using our tools to bring inflation back down to our 2% goal and to keep longer-term inflation expectations well anchored. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run. The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done,” he added.