No rate cuts until Powell prices are clear

photo = AP

Federal Reserve Chairman Jerome Powell has made it clear that he intends to keep interest rates high until inflation is firm.

“I am very confident that inflation is going down towards the 2% target,” Powell said at a news conference after the Federal Open Market Committee (FOMC) meeting on the 21st (local time) “Until that happens happens, we will not consider a rate cut,” he said.

The Fed raised its benchmark interest rate by 0.75 percentage points, raising its federal funds rate target to 3.00% to 3.25%, as expected. The interest rate has been raised by 0.75 percentage points for the third consecutive time since June.

Chairman Powell emphasized that he would continue to tighten monetary policy, including raising interest rates and maintaining high interest rates. “My main message hasn’t changed since Jackson Hall,” he said. “No one knows whether this process will lead to a recession, and if so, how significant the recession will be.”

The market was somewhat expecting comments related to ‘managing the increase in the interest rate’ or ‘changing interest rate cuts’. However, Chairman Powell has been using the term ‘keep going’ again since the Jackson Hole Economic Policy Symposium at the end of last month. This is the title of a book by the Chairman of the Fed at the time, Paul Volcker, who suddenly raised interest rates despite the economic downturn in the early 1980s.

It was also predicted that the race would have a hard landing rather than a soft landing. “A soft landing is a very challenging task,” Powell said. Even if an increase in the interest rate leads to an increase in the unemployment rate and a slowdown in the economy, he believes that the priority is to contain inflation.

As for the size of the next rate hike, he said, “Nothing has been decided,” he said. “In my opinion and the opinion of the FOMC, there is a long way to go.

Meanwhile, the Federal Reserve raised its base rate to 4.4% at the end of this year and 4.6% at the end of next year via a dot chart (an indicator that shows FOMC members’ future interest rate forecasts) released after the meeting

So, given that there are two regular FOMC meetings left this year, if this goes as expected, one big move (a 0.75 percentage point rate hike at a time) and one big move (a 0.5 percentage point rate hike at a time) are expected. do.

Hana Kim, reporter at Hankyung.com hana@hankyung.com

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