The Federal Reserve chair's speech — at an annual conference of central bankers — highlighted the uncertainties surrounding the economy and the complexity of...
Powell also said the Fed believes its key rate is high enough to restrain the economy and cool growth, hiring and inflation. But he said it is hard to know how high borrowing costs have to be to restrain the economy, “and thus there is always uncertainty” about how effectively the Fed’s policies are in reducing inflation.As a result, the Fed “will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data,” Powell said.
Powell acknowledged the decline in inflation from its peak, which he called “very good news.” And consumer prices, excluding the volatile food and energy categories, have also begun to ease.“But two months of good data,” he added, “are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. Although inflation has moved down from its peak — a welcome development — it remains too high.
Many traders in the financial markets envision not only a soft landing but an acceleration of growth. Those expectations have helped fuel a surge in bond yields, notably for the 10-year Treasury note, which heavily influences long-term mortgage rates. Accordingly, the average fixed rate on a 30-year mortgage has reached 7.23%, the highest level in 22 years. Auto loans and credit card rates have also shot higher and could weaken borrowing and consumer spending, the lifeblood of the economy.
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