Citing a recent “lack of further progress” in returning inflation to the Federal Reserve’s 2% target, Fed Chairman Jerome Powell today said that the Federal Open Market Committee may need to maintain higher interest rates for longer than anticipated.
The FOMC has held the target range of the federal funds rate at 5.25% to 5.5% since July 2023. However, the committee has suggested that it could begin easing monetary policy later this year if economic data gives it confidence that it is making progress in dialing back inflation. Speaking during a panel discussion at the Canada Institute, Powell said data for the first three months of the year have shown that inflation pressures remain persistent.
“The recent data have clearly not given us greater confidence and instead indicate that it is going to take longer than expected to achieve that confidence,” Powell said.
In a separate speech today, Fed Vice Chairman Philip Jefferson also expressed caution, saying the job of restoring 2% inflation is not yet done. “Of course, the outlook is still quite uncertain, and if incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer,” Jefferson said. The FOMC next meets April 30-May 1.
