Today: 14-04-2024

Powell says inflation is still too high and lower economic growth may be needed to reduce it.

Federal Reserve Chairman Jerome Powell acknowledged recent signs of inflation cooling, but stated on Thursday that the slowdown in price growth is not yet sufficient to determine a trend, and the central bank will remain "firmly committed" to its 2% mandate.

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

"Though the path is likely to be bumpy and take some time, my colleagues and I are united in our determination to see inflation return to 2 percent sustainably," Powell added.

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

Data in recent months has shown continued progress in achieving both parts of our dual mandate—maximum employment and stable prices," he said.

His comments came on the same day that initial jobless claims fell to their lowest weekly level since early 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 bring supply and demand into balance in the labor market. However, robust job creation in September and sluggish layoffs could threaten progress in combating inflation.

"Further evidence of sustained growth above trend, or that labor market tightness is not abating, could pose risks to further progress on inflation and could be a basis for more aggressive policy action," he said.

In recent days, other Fed officials have suggested that the Fed can afford to be patient. Even some Fed officials who advocate for tighter monetary policy have suggested that the central bank can hold off on further rate hikes for now as they monitor the delayed impact they expect rate hikes to have on the economy.

Many markets expect the Fed to refrain from further rate hikes, though questions remain about when officials may begin cutting rates. Powell was noncommittal about future policy.

"With uncertainty and risks surrounding the outlook, and with how far we have come, the Committee is acting prudently. We will be making determinations about the degree of further policy tightening and how long policy will remain restraining based on the full range of incoming data, evolving outlooks, and risks to the outlook," he said.