Federal Reserve Chairman Jerome Powell today reiterated his belief that further increases in the federal funds rate will be necessary to bring inflation down to the agency’s 2% target. The Federal Open Market Committee raised the rate by 25 basis points at its most recent meeting earlier this month—a slowdown following a string of steeper rate hikes last year. However, shortly after the meeting, a federal report showed the U.S. economy unexpectedly grew by 517,000 nonfarm jobs in January.
A strong labor market is likely to maintain upward pressure on inflation. During an interview at the Economic Club of Washington, D.C., Powell said that the jobs report underscored his view that there is a “significant road ahead” before inflation returns to the Fed target, which he doesn’t see happening until at least 2024.
“There’s been an expectation that it will go away quickly and painlessly, and I don’t think that’s at all guaranteed,” he said. “The base case for me is it will take some time and we’ll have to do more rate increases, and we’ll have to look around and see if we did enough.”