Jerome Powell does not rule out a brake on rate hikes in December

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by Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – The U.S. central bank could slow the pace of rate hikes as early as December, Federal Reserve Chairman Jerome Powell said on Wednesday during a panel hosted by the Brookings Institution in Washington.

“It would make sense to moderate the pace of our price increases as we approach the level that should be sufficient to bring inflation down,” he said.

“The timing for rate hike moderation could come as early as the December meeting,” he added.

The fight against inflation is far from over, however, he also stressed.

While he did not specify at what level he placed the “neutral rate”, i.e. neither stimulating nor handicapping for the economy, he declared that it was probable that it would prove to be higher the 4.6% mentioned by Fed officials in their September projections.

The fight against inflation will require “maintaining a restrictive policy for some time”, he said, a remark perhaps intended to impress on the markets that the prospect of a rate cut next year is on the Fed’s shelves.

“We will stay on this path until the work is completed,” he warned.

The rate target for federal funds (“fed funds”), the Fed’s main monetary policy instrument, was raised in early November to between 3.75% and 4%, the highest level since early 2008.

The central bank has raised its rate in the past six meetings, making its fastest rally since the Paul Volcker era in the 1970s and 1980s.

(Howard Schneider; French version Nicolas Delame)

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