Federal Open Market Committee members are not confident that current monetary policy is restrictive enough to bring inflation down to the Federal Reserve’s target of 2%, Fed Chairman Jerome Powell said today. Speaking at an economic conference in Washington, D.C., Powell said the FOMC is making decisions “meeting by meeting” on whether to further raise the federal funds rate or leave it untouched at its current level of 5.25% to 5.5%.
“Inflation has given us a few head fakes,” he said. “If it becomes appropriate to tighten policy further, we will not hesitate to do so. We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening.”
Powell also said that while pandemic-caused supply chain disruptions drove the initial surge in inflation, it is not clear that recent improvements in those supply chains will be enough to reach the Fed’s 2% goal. “Going forward, it may be that a greater share of the progress in reducing inflation will have to come from tight monetary policy restraining the growth of aggregate demand,” he said.