With inflation in the United States still excessive, most Federal Reserve officials expect to raise interest rates further this year, Chair Jerome Powell said in prepared testimony to be delivered to a House committee Wednesday.
“Inflation pressures continue to run high, and the process of getting inflation back down to 2 per cent has a long way to go,” Powell said on the first of two days of semi-annual testimony on Capitol Hill.
The hearings, beginning with the House Financial Services Committee, follow a Fed meeting last week that produced a muddled picture of its likely next steps. The 18 members of its policy committee predicted two more interest rate hikes this year — one more than analysts had expected — to fight inflation, which they now think will be higher next year than they previously forecast.
Powell stressed at his news conference that leaving rates unchanged for now would allow the Fed to take time to assess the impact of its rate increases on the economy before deciding on its next moves. It has raised its benchmark rate by a substantial 5 percentage points in barely more than a year — the fastest pace of rate hikes in four decades.
Powell reiterated that the Fed still hopes to pull off a tricky feat: Weaken the economy enough to tame inflation, without undermining it so much as to cause a deep recession. Powell has sought to straddle both views regarding the Fed's progress on inflation. Last week, he said that inflation remains too high and added that there hasn't been nearly as much progress in slowing it as the Fed would like.
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