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| The Fed chairman said the agency understands the difficulties that high inflation is causing and is strongly committed to returning inflation to its 2% target. (Source: Reuters) |
"The rate standstill is just a temporary pause, not a sign that the central bank has stopped raising rates," he noted. "Although the Fed postponed a rate hike at its most recent meeting, most policymakers expect higher rates to be appropriate by the end of 2023."
The Fed chairman added that the agency understands the difficulties that high inflation is causing and is strongly committed to returning inflation to its 2% target.
Fed policymakers are weighing factors such as the strength of the labor market and modest economic growth — signs that rate hikes have not yet had a full impact on the broader economy.
The Fed has seen the impact of tightening policy on demand in interest-rate sensitive sectors, such as housing, but it will take time to see the full impact of tightening monetary policy, especially on inflation, Mr. Powell said.
"Stress in the banking sector is also creating negative effects for households and businesses, and the impact of this problem is still unclear," the head of the Fed emphasized.
Given the above situation, Mr. Powell said that the latest decision not to raise interest rates was considered a cautious step, allowing the Fed to assess additional information and the impact of monetary policy.
After a two-day policy meeting of the Federal Open Market Committee (FOMC) last week, officials forecast two more rate hikes this year, each by 0.25 percentage points.
The US central bank's policy rate is currently fixed at 5-5.25%.
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