Fed Chair Powell Sees Some Positive Movement on Inflation, but Not Enough to Expect Rate Cut in 2023

Fed Chairman Jerome Powell began his post-meeting press conference by reaffirming the Federal Reserve’s stance in the fight against inflation.

In reiterating his comments from previous press conferences, Powell remained “strongly committed” to bringing down inflation. Powell also mentioned the need for ongoing rate increases while stressing the problems that inflation can cause for consumers and the labor market.

“Without price stability, the economy does not work for anyone,” Powell said.

Powell Sees Positive Movement in Inflation, Cites Need for More Work

Powell acknowledged that there have been positive signs in recent employment reports even while labor data has remained strong but said it was too early to celebrate.

“It is a good thing that the disinflation that we have seen so far has not come at the expense of the labor market,” Powell said, but added that the economy was still in an “early stage” of easing inflation.

He said that a decline in goods prices and data showing recent softening of the rental housing market is a “good story.”

However, he said that the Fed doesn’t “see disinflation yet” in the core services part of inflation, excluding housing.

Powell – “We Expect Ongoing Hikes”

Despite the Federal Reserve’s aggressive rate hiking campaign, the central bank has more work to do, according to Fed Chair Jerome Powell.

“I would say that our focus is not on short-term moves but on sustained changes to broader financial conditions,” he said during Wednesday’s press conference. “And it’s our judgment that we’re not yet at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes.”

Powell – Fed Could Conduct a Few More Rate Hikes

Fed Chairman Jerome Powell said the central bank could conduct a few more rate hikes to bring inflation down to its target range.

“We’ve raised rates four and a half percentage points, and we’re talking about a couple of more rate hikes to get to that level we think is appropriately restrictive,” Powell said. “Why do we think that’s probably necessary? We think because inflation is still running very hot.”

Powell – Too Early to Declare Victory on Inflation

Inflation is easing in some areas of the economy but it’s too early for the Federal Reserve to say the battle’s been won, said Fed Chair Jerome Powell.

“It would be premature,” he said. “It would be very premature to declare victory, or to think that we’ve really got this.”

The disinflation process, he said, is in its early stages, but the “job is not fully done.” Core services excluding housing have yet to experience disinflation, he added.

Powell also expects inflation to continue moving up in housing services, before moving down.

Powell says Disinflationary Process has Started

“We can now say I think for the first time that the disinflation process has started. We can see that and we see it really in goods prices so far,” Fed Chairman Jerome Powell said at a news conference Wednesday.

Powell Acknowledges that it is ‘Certainly Possible’ Fed Funds Rate Stays Below 5%

Powell said he thinks the Fed can get inflation back down to 2% “without a really significant downturn, or a really significant increase in unemployment.”

He also added that it is “certainly possible” that the Fed will keep its benchmark interest rate below 5%. The Fed’s latest hike brings that Federal funds rate to a range of 4.50% to 4.75%.

Powell Expects Growth at a ‘Subdued Pace’ in 2023

Fed Chair Jerome Powell is bracing for growth this year, albeit at a “subdued pace.”

“My base case is that there will be positive growth this year,” he said.

Powell Says, Don’t Expect a Rate Cut in 2023

Jerome Powell said he doesn’t expect the Fed to cut rates this year, as some major strategists project, according to CNBC.

“Given our outlook, I don’t see us cutting rates this year, if our outlook comes true,” the Fed chair said.

Powell also said he was “not concerned” about the bond market implying one more hike before a pause, because some market participants are expecting inflation to fall faster than the Fed does.

“If we do see inflation coming down much more quickly, that will play into our policy setting, of course,” Powell said.