The slight easing of inflation is a welcomed sight for consumers but an end to the more than year-long battle against rising prices is far from over according to Federal Reserve Chair Jerome Powell. Pool photo by Brendan Smialowski/UPI | License Photo
Feb. 7 (UPI) -- The slight easing of inflation is a welcomed sight for consumers but an end to the more than year-long battle against rising prices is far from over according to Federal Reserve Chair Jerome Powell.
During an appearance at the Economic Club of Washington, Powell said he expects to make significant progress on inflation this year, but the Fed's work is far from done.
Referencing his announcement that the Federal Open Market Committee decided to raise interest rates by 25 basis points last week, Powell said the message the committee was trying to send was that "this process is likely to take quite a bit of time." Many areas of the economy are showing progress but the housing market continues to struggle, he cited.
"It's not going to be, we don't think, smooth. It's going to be bumpy," Powell said.
The Fed chair said more rate increases will be coming and policies will continue to be restrictive for some time, even as benchmark reports indicate economic recovery. January's labor market report was stronger than he expected. He noted that it is good that inflation has slowed without the labor market taking a hit, but it shows why the Fed thinks the process will take "a significant amount of time."
More than 517,000 jobs were added in January, according to the report published by the Bureau of Labor Statistics. Job growth was "widespread" with the largest gains in leisure and hospitality, two of the sectors most hardly hit by the COVID-19 pandemic.
Powell was asked by David Rubenstein, president of the Economic Club, why the Federal Reserve wants to see the rate of inflation brought down to 2% instead of 3%, which it has typically hovered around. Powell said 2% is the international standard.
"If you look at our forecast we expect 2023 to be a year of significant declines in inflation," Powell said. "[Personal Consumption Expenditures] is running about 5% on a 12-month basis. My guess is it will take certainly into not just this year but into next year to get down close to 2%."