More hikes needed to beat inflation: Federal Reserve boss Jerome Powell warns it’s too early to ‘declare victory’
US Federal Reserve chief Jerome Powell warned it was too early to “declare victory” in the fight against inflation even as the central bank slowed the pace of interest rate hikes.
His quarter-point increase was the last increase since last spring – but lower than the half-point rise in December and the string of three-quarter-point increases in 2022.
Powell said “the disinflationary process has begun” but “a few more rate hikes” would be needed.
That raised hopes that an end could soon be in sight for the bulls, with New York’s S&P 500 starting to turn higher after earlier falls.
US inflation has been falling since hitting a four-decade high of 9.1% in June. In December, it was 6.5%.
Warning: US Federal Reserve chief Jerome Powell has warned it’s too early to ‘declare victory’ in the fight against inflation
Powell said, “It would be very premature to declare victory or to think we’ve really figured this out.”
He added that “continued increases” would be appropriate and that “much more evidence” would be needed to show that inflation is on a downward trajectory.
The Fed is targeting a 2% inflation rate and was urged last month by Gita Gopinath of the International Monetary Fund to stay the course on rate hikes.
Rate hikes in the United States have a global impact because they make debt repayments more expensive for countries and companies that have borrowed in dollars.
They also make dollar commodities such as oil more expensive.
The benchmark interest rate range in the United States is now between 4.5 and 4.75%. Last March, the range was 0 to 0.25%.
Richard Carter, analyst at Quilter Cheviot, said: “Investors should not confuse this with the end of the rate hike cycle, but rather a breather break.”
Rate hikes are also expected today from the Bank of England and the European Central Bank.
