Federal Reserve chief Jerome Powell warned on Tuesday that the road would be “long, even bumpy” to get inflation back down, warning that if the economy remains too strong, further rate hikes will be needed.
Guest of the Economic Club of Washington, the president of the American Central Bank (Fed) declared: if the economic data were to continue to be stronger than envisaged (…) we would certainly raise the rates more.
The Fed Chairman made the comment as January US jobs figures surprised with their strength, showing more than half a million new hires when analysts were expecting less than 200,000.
Mr. Powell however welcomed, as he had done after the monetary meeting last week, the fact that the process of disinflation has begun.
The Fed must do more, however, by raising rates further and keeping monetary policy tight for some time, he insisted again. That will take time (…). It could be bumpy, he warned.
The Fed is expecting to see prices in particular decline in the services sector, which is not yet the case, he said.
Mr Powell said he expects inflation to slow significantly in 2023 but price inflation is only expected to approach the 2% target the year after.
On Wall Street, the indices which were slightly in the green before Mr. Powell’s interview, reversed their course and were in negative territory, the Dow Jones yielding 0.66% at 6:30 p.m. GMT.
During its monetary meeting on February 1, the Fed raised rates for the eighth time in a row, but at a slower pace of a quarter of a percentage point. They are now between 4.50% and 4.75%.