Fed's Powell: "Possible Reduction in Rate Hike Size Starting December"

[Asia Economy New York=Special Correspondent Joselgina] Jerome Powell, Chair of the Federal Reserve (Fed), stated that the pace of interest rate hikes could be reduced starting in December. This follows an unusual four consecutive giant steps (0.75 percentage point increases in the benchmark interest rate) and supports a big step (0.5 percentage point increase) in December.

On the 30th (local time), Powell attended an economic outlook and labor market event hosted by the Brookings Institution in Washington DC and said, "The time to slow the pace of rate hikes could come at the December meeting." He explained, "The Fed raised rates quickly, and it takes time for these moves to affect the economy," adding, "It would be reasonable to slow the pace of rate hikes."

However, Powell reaffirmed the stance that restrictive levels must be maintained, saying, "Despite some progress, there is still a long way to go to achieve price stability." While he refrained from giving specific comments on the terminal rate, he hinted that it would be higher than the dot plot presented in September. The median rate for next year disclosed then was 4.6%.

He mentioned, "It is appropriate to continue raising rates," emphasizing that tightening must continue until clear signs of inflation easing appear. He explained that it takes time for the effects of the Fed's rate hikes and balance sheet policies to materialize. He also positively evaluated the Fed's move to raise rates by a whopping 3.75 percentage points so far this year.

Powell stressed, "The Fed still has a way to go," and warned, "History strongly cautions against premature easing policies."

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