Powell added at a conference of the European Central Bank in Sintra, Portugal“We have come a long way” with regard to raising interest rates, noting that the suspension this month came with the aim of absorbing the impact of the rate hike cycle on the economy.
He added that the US Central Bank has not yet decided on the methods to be used regarding future rate hikes, but “I will not rule out taking such action in future meetings at all.”
Powell also added that he does not expect inflation to return to the bank’s two percent target before 2025, but if it drops sharply, the central bank may not need to continue monetary tightening with the same force and for the same duration.
“We will do what we have to do to restore price stability,” Powell added.
But Powell made it clear that regardless of the pace of upcoming monetary policy moves, “the committee believes beyond any doubt that there is a need for more work” with regard to tightening monetary policy to ease inflationary pressures.
The date for the next meeting of the US Central Bank’s Open Market Committee to set interest rates is July 25-26.
Looking at the CME FedWatch index data, the markets expect, by 84.3 percent, that the Fed will raise interest rates by 25 basis points, compared to 15.7 percent who expect to keep it unchanged.
On the other hand, Jerome Powell stressed that a recession in the United States after the decision to raise interest rates is not the most likely possibility, but it is “certainly possible.”
“The least likely case is that we find our way to a better balance without a really severe recession,” he added.
But he added that there is also a “high probability of a slowdown,” adding that the US economy is enjoying a great deal of strength.
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