Federal Reserve Governor Jerome Powell confirmed central bankers would continue tightening monetary policy. Only at a lower rate than so far. The effects of monetary policy are yet to be felt by the US economy.
Interest rate rise
The Fed’s next monetary policy meeting is likely to result in a 0.5 percentage point rise in the base interest rate. It’s more likely than another hike by 0.75 percentage points. Fed Governor Jerome Powell’s speech was carried in that vein.
“Monetary policy hits the economy and inflation with an indefinite delay. The full effects of our rapid tightening are yet to become apparent in the economy,” Jerome Powell said in his Thursday speech. Meanwhile, investors remained concerned that the Fed would continue to be harshly restrictive and cause the economy to move into recession.
Long-term inflation
Jerome Powell stressed that the Fed is aware of this risk and that it does not wish such a scenario to really occur. The Fed chief also indicated that inflation would remain at a high level in the economy for quite a long time. Powell’s words about slowing “hiks” reassured financial markets, with a number of stock indexes withing off earlier losses.
