Powell: "May Not Need to Raise Interest Rates as Much as Expected"

Jerome Powell, chairman of the Federal Reserve (Fed), the central bank of the United States, indicated that the rate hike cycle is now nearly complete.

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On the 19th (local time), Powell said during a discussion at the Thomas Laubach Research Conference held in Washington DC, "There is uncertainty about the lagged effects of the tightening policy and the extent of liquidity reduction due to recent stress in the banking sector."

He noted that the tightening policy has been maintained for a long time and stated, "Given the situation we have reached, we have the luxury of making a cautious assessment while observing the data and the gradually evolving outlook."

Powell suggested that the unstable situation in the banking sector has worsened lending conditions, which could pose a burden on economic growth, employment, and inflation. He said, "As a result, we may not need to raise the policy rate as much to achieve our goals. Of course, how much that will be is very uncertain."

The Fed's Federal Open Market Committee (FOMC) meeting is scheduled for July 13-14. While a rate freeze is widely expected, attention is focused on whether the Fed will cut rates within the year.

Meanwhile, the percentage of investors expecting a rate hike at next month's FOMC dropped from 33% before Powell's remarks to 13%.

However, since Powell did not clearly state his position on a rate hike in June, foreign media assessed that there is still a possibility of a rate increase depending on future economic indicators.

Powell said, "The guidance we can provide today is limited to identifying factors to watch in assessing how much additional tightening is needed to bring inflation down to 2%," indicating that he did not provide clear guidance, according to major foreign media.

Additionally, Powell explained, "The data continue to support the FOMC's view that it will take more time to reduce inflation," emphasizing that inflation persists particularly due to labor shortages in the service sector.

This content was produced with the assistance of AI translation services.