United States: According to Jerome Powell, the Fed should start raising rates again

WASHINGTON – After a marked pause last week, the Federal Reserve should resume its rate hikes, as chairman Jerome Powell reiterated on Wednesday that “almost all” of the institution’s leaders expect them to raise them further by the end of the year.

“Almost all” of the company’s officials — governors and regional branch presidents — “expect that it will be appropriate to raise interest rates somewhat before the end of the year,” Jerome Powell told elected members of the House of Representatives. During his semi-annual hearing before a committee.

On June 14, the Fed paused its key rate hikes for the first time since March 2022 and by a total of 5 basis points after 10 hikes. Rates are now in the range of 5 to 5.25%.

“At last week’s meeting, given where we’re coming from and the pace at which we’re moving, we felt it was prudent to ‘allow’ Fed officials to ‘keep rates where they are,’ to assess information and its implications for monetary policy,” said Jerome Powell.

These rate hikes encourage commercial banks to offer higher rates on loans to households and businesses, aimed at slowing economic activity, easing pressure on prices and reducing inflation.

The central bank chief further pointed out that this is “higher than our long-term objective of 2%”.

Therefore, to “determine” how much more they need to tighten their monetary policy to achieve this objective, “we will take into account the overall tightening of monetary policy, the impact of monetary policy on economic activity and inflation. Economic and financial developments,” he added.

But Jerome Powell warned that “reducing inflation will require a period of below-trend growth.”

The next Fed meeting is July 25-26.

Jerome Powell already indicated on June 14 that after the announcement of the decision by the Monetary Policy Committee, the majority of corporate leaders expected more rate hikes. However, he noted, “a modest pace.”