Federal Reserve Chairman Jerome Powell says the pace of rate hikes could slow but may ultimately need to go higher than the forecast in September.
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Saying the war in Ukraine is causing not only “tremendous human and economic hardship” but driving inflation, the Federal Reserve approved its fourth 75-basis point rate hike of the year Wednesday, but signaled it could make smaller increases going forward.
The Fed has raised the federal funds overnight rate six times this year, bringing the benchmark rate to a target range of 3.75 to 4 percent. While the Fed started with a modest 25-basis point increase on March 17, it has made more drastic hikes as inflation has shown few signs of moderating.
Russia’s Feb. 24 invasion of Ukraine has driven up prices for energy and food and created upward pressure on inflation, Federal Reserve Chairman Jerome Powell said at a press conference. While the pace of rate hikes could slow, they may ultimately need to go higher than forecast in September, he said.
“At some point, as I’ve said in the last two press conferences, it will become appropriate to slow the pace of increases to bring inflation down to our 2 percent goal,” Powell said. But the Fed is grappling not only with how fast to raise the federal funds rate but how high and for how long.
The “dot plot” gauging the collective views of Fed policymakers in September showed members of the Federal Open Market Committee expected they’ll need to bring the federal funds rate to 4.6 percent by the end of next year to tame inflation.
Since the Fed’s last meeting, incoming data on labor and consumer prices “suggest to me that we may move to higher levels than we thought at the time of the September meeting,”…