On Thursday, Federal Reserve Chair Jerome Powell asserted that the U.S. central bank is prepared to raise interest rates further if necessary to bring inflation down to its long-term target of two percent. Powell addressed a Washington conference, acknowledging the uncertainty in achieving the inflation goal and stating that if tightening policy is deemed appropriate, the Fed will not hesitate to do so. These remarks followed the recent decision by the central bank to maintain interest rates at a 22-year high for the second consecutive meeting, sparking expectations that it had concluded its rate-hiking cycle.
Powell emphasized the Fed's commitment to attaining a sufficiently tight monetary policy stance, but expressed a lack of confidence in having achieved such a position. Despite concerns about the potential for a resurgence of inflation, Powell suggested that the Fed likely considers its current monetary policy to be significantly restrictive. He noted the careful monitoring of the policy's impact on the economy and highlighted the strong economic growth and relatively robust labor market, albeit with recent signs of a slowdown.
Even with the Fed's assertive monetary tightening, which raised rates to a range between 5.25-5.50 percent, the U.S. economy continues to demonstrate strength. The recent positive economic indicators have increased the probability of a "soft landing," where the Fed effectively addresses inflation without pushing the country into a recession.