US Fed chair Jerome Powell leaves door open to two straight rate hikes ahead

WASHINGTON - United States Federal Reserve chairman Jerome Powell said on Wednesday that the central bank is leaving open the possibility of consecutive interest rate hikes in the months ahead to cool the economy further.

The Fed recently

paused its aggressive cycle of rate increases

after 10 consecutive hikes to give policymakers more time to weigh the effects of existing moves on inflation.

At the same meeting, a majority of members on the Fed’s rate-setting committee indicated that they see interest rates rising twice more before the end of 2023.

“We believe there is more restriction coming,” Mr Powell told a central banking conference in Portugal on Wednesday.

But he added that the Fed has not decided whether it will raise rates every other meeting, as some analysts have suggested.

“I wouldn’t take, you know, moving to consecutive meetings off the table at all,” he said.

Mr Powell said that US monetary policy will likely take more time to act against high inflation and bring it down to the Fed’s long-term target of 2 per cent.

“Policy has not been restrictive enough for long enough,” he added.

The US central bank has raised its benchmark lending rate by five percentage points in little more than a year.

Inflation has fallen since the Fed’s cycle of monetary tightening began, but it remains well above target.

At the same time, the unemployment rate has remained close to historic lows, although the labour market has shown some signs of softening recently.

Fed researchers earlier predicted the US will enter a mild recession later in 2023.

But on Wednesday, Mr Powell repeated previous comments indicating that he believes the world’s biggest economy could still avoid a recession.

“To me, it is not the most likely case, but it is certainly possible,” he said.

Futures traders are assigning a probability of more than 80 per cent that the Fed will vote to raise interest rates by a quarter percentage point at its next meeting between July 25 and 26.

That would bring the Fed’s benchmark lending rate to a range between 5.25 per cent and 5.5 per cent, which would be its highest level in 22 years. AFP