“Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go,” Chair Jerome Powell said.
this year, Chair Jerome Powell told a House committee Wednesday.
Asked on Wednesday to clarify last week’s messaging, Powell told the House Financial Services Committee that keeping rates level was consistent with the Fed’s increasing focus: Slowing the pace of its hikes in order to avoid raising rates higher than needed to reduce inflation and risk causing a deep recession in the process.
Yet Rep. Maxine Waters of California, the senior Democrat on the panel, said “the Fed made the right decision to pause interest rate hikes.”In his remarks Wednesday, Powell also indicated that the Fed chose to keep its key interest rate steady last week so it could assess the impact of this spring on the banking sector and whether the failures would reduce credit to consumers and businesses and slow the economy.
But some committee Republicans argued Wednesday that requiring banks to hold more funds in reserve would restrict their ability to lend. Small businesses, they warned, would be especially hurt because they depend more on bank loans than do large companies, which can issue their own bonds. Reduced lending, they asserted, would weaken the economy.
With inflation still well above the Fed’s 2% target, most economists have said they believe that a rate hike at its next meeting in late July is all but assured. What actions the central bank might take after that remains much less clear. The policymakers indicated last week that they expect to raise rates twice more this year. Yet they might not follow through if economic data suggests that inflation is falling quickly back to their target level.
Yet on Wednesday, Powell repeated a warning he has often made: Defeating inflation won’t be painless.
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