Federal Reserve (Fed) Chairman Jerome Powell left the door open for two more consecutive rate hikes from the U.S. central bank in the coming months, at a conference of central bankers in Sintra, Portugal on Wednesday.
The Fed’s latest meeting ended with a pause, after a series of ten consecutive hikes to bring its main rate to a range between 5% and 5.25%, with the aim of giving its committee more time. monetary policy (FOMC) to see the effects of the increases already made on inflation, which remains above the 2% target.
Although falling, inflation in the United States remained 4% in May, according to the CPI index. That calculated according to the PCE index, favored by the Fed, should be known on Friday.
However, we are far from a return to normal, insisted the Fed Chairman, we do not expect a return of underlying inflation (i.e. excluding the price of food and energy, Editor’s note) below 2% this year or next year, rather for the following one.
During the last meeting in mid-June, the majority of FOMC members felt that rates should be raised two more times, Powell said.
We believe that there will still be a tightening of monetary policy, underlined the chairman of the Fed, specifying that it has not been decided whether these increases will be realized during the next two meetings or smoother over time.
I do not rule out the possibility of an increase in two successive meetings, however added Jerome Powell.
But the effects of US monetary policy will take time to be felt, he said, before inflation returns to the 2% target and stays there.
Monetary policy has not been tight enough for long enough, Mr. Powell insisted.
While inflation is indeed on the way to a return to normal, the deceleration in price increases is taking place at a much slower pace than expected, in a context where the labor market and growth also remain more solid than anticipated.
At the beginning of the year, the Fed had announced that it expected a slight recession during the second half of the year, but Jerome Powell does not rule out the fact that the American economy could avoid it.
It’s not the most obvious possibility, but it’s still a possibility, he said.