“We have more work to do” to bring down inflation after the central bank raised its rate by 25 basis points to 4.50%-4.75% Federal Reserve Chair Jerome Powell said in his post-monetary policy decision press conference.
That’s emphasizing to financial markets that the central bank isn’t planning on backing down from its policy tightening yet.
Labor market is still extremely tight, with job gains being robust. “Although the pace of jobs growth has slowed”, the labor market is still “out of balance,” he said.
2:59 PM ET: There’s still a path to a “soft landing.” “My base case is that the economy can return to 2% inflation without a substantial downturn,” he said.
2:59 PM ET: He doesn’t expect that core services, ex-housing, inflation will come down significantly without a better balance in the labor market.
2:55 PM ET: When asked about the Federal debt ceiling, Powell said the only way forward is for Congress to raise the debt level. “Don’t assume” the Fed can protect the economy from a debt default, he added.
2:51 PM: “We’ve raised the rate by 450 basis points” and we’re talking about a couple more rate hikes before a pause, Powell said. It’s his assessment that the Fed isn’t very far from the restrictive level.
2:47 PM ET: Nasdaq has risen 1.2%, S&P 500 +0.5%, Dow pares loss, -0.2%.
2:46 PM ET: “It would be very premature to declare victory,” he said. “The disinflation process has started, especially in goods.”
The policymakers have “no desire” to over-tighten. And they can adjust policy if they find that they did over-tighten.
2:44 PM ET: There’s “still work to do” in tightening financial conditions. If data warrants, the FOMC would be willing to move rates higher than its previous projections. At the December meeting, the median projection was for ~5.1% federal funds rate.
2:43 PM ET: Disinflation still hasn’t affected core services costs, excluding housing, he said.
Update at 2:41 PM ET: “It’s gratifying to see the disinflationary process now underway,” Powell said. So far, he’s seeing progress in bringing down inflation without weakening of labor conditions.
Total PCE prices have risen 5.0% in the past 12 months, and core PCE prices have increased 4.4% in the same period, both well above the Fed’s 2.0% inflation goal.
He said now is not the time for complacency. “Although inflation has moderated recently, it still remains too high.”
The higher rates mean the economy is likely to result in economic growth below the long-run growth trend and softening of labor market.
“We will stay the course until the job is done,” Powell said.
Developing… check back for updates.
Earlier, Federal Reserve boosted its policy rate by 25 basis points, signals more hikes ahead