Federal Reserve Chairman Jerome Powell has acknowledged recent signs of inflation cooling down but stated that the slowdown in price growth is not yet sufficient to determine a trend

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Investing / Monday, 30 October 2023 14:59

Federal Reserve Chairman Jerome Powell has acknowledged recent signs of inflation cooling down but stated that the slowdown in price growth is not yet sufficient to determine a trend. He emphasized the central bank's commitment to its 2% mandate.

"Inflation is still too high, and a few months of good data are just the beginning of what it will take to build confidence that inflation is sustainably moving down to our goal," Powell said in prepared remarks for his speech at the Economic Club of New York. "We cannot yet know how long these lower readings will persist or where inflation will stabilize in coming quarters."

"While this path is likely to be bumpy and take some time, my colleagues and I are united in our determination to bring inflation down to 2 percent," Powell added.

However, he also noted the progress made in achieving the Federal Reserve's dual mandate.

Recent data have shown that, although inflation remains significantly above the target level, the monthly growth rates have slowed down, and the annual rate has decreased to 3.7% from over 9% in June 2022.

"The data of recent months continue to show ongoing progress in achieving both parts of our dual mandate—maximum employment and price stability," he said.

Powell's remarks came on a day when initial jobless claims reached their lowest weekly level since the beginning of 2023, indicating that the labor market remains tight and could exert upward pressure on inflation.

Federal Reserve officials have used interest rate hikes in part to try to balance labor market demand and supply. However, strong job creation in September and slow rates of layoffs could threaten the progress made in fighting inflation.

"Further evidence of sustained above-trend growth or that labor market tightness is not abating would pose risks to continued progress on inflation and could be grounds for further policy tightening," Powell stated.

In recent days, other Federal Reserve officials have suggested that the central bank might need to exercise patience. Even some officials advocating for tighter monetary policy have indicated that the Federal Reserve could pause rate hikes for now, as they monitor the delayed impact they expect rate hikes to have on the economy.

Many markets expect the Federal Reserve to refrain from further rate hikes, although questions remain about when officials might begin to cut rates.

Powell was noncommittal about future policy.

Given the uncertainty and risks and how far we have come, the Committee is proceeding cautiously. We will be making decisions about the degree of additional policy tightening and how long policy will remain restrictive based on the evolving data, changing outlook, and the balance of risks," he said.