Inflation in the United States remains too high, the president of the American central bank (Fed), Jerome Powell, said on Thursday, insisting on the need to move forward “cautiously” so as not to damage the economy, but not excluding not raise rates again if necessary.
Jerome Powell also stressed that “geopolitical tensions are very high and pose significant risks for global economic activity”. In a rare personal statement, he said he “found the attack on Israel horrifying, as did the prospect of further loss of innocent lives.”
During this speech at the Economic Club of New York, Jerome Powell stressed that “inflation is still too high, and a few months of good figures are only the beginning of what it will take to be certain that the inflation falls sustainably towards our objective of 2.0%.
But, he warned, “the path may be strewn with pitfalls and take time.”
Inflation remained stable over one year in September in the United States, at 3.7% over one year, according to the CPI index published by the Department of Labor, but slowed over one month, for the first time since May , bringing a touch of optimism.
The PCE index, favored by the Fed, will be published on October 27, just before the institution’s next meeting, on October 31 and November 1.
Jerome Powell did not rule out the possibility of raising rates further: “additional signs of sustainably above-trend growth, or (…) that tensions on the labor market are no longer easing, could jeopardize continued progress on inflation and justify further tightening of monetary policy,” he said.
But he insisted on the fact that the Monetary Policy Committee (FOMC), the Fed’s decision-making body, “proceeds with caution” to sustainably curb inflation, without causing a recession.
To slow inflation, which reached its highest level in more than 40 years in June 2022, the Fed has raised its rates 11 times since March 2022. These are now in the range of 5.25- 5.50%, the highest since 2001.
Monetary policy is now “restrictive”, that is to say that it “exerts downward pressure on economic activity and inflation”, clarified Jerome Powell.
However, the effects of these actions take a long time to be visible in the economy, and this could continue to weigh, he said.