| Advertisement |
March 8 (UPI) -- Federal Reserve Chair Jerome Powell told the House Financial Services Committee Wednesday that more interest rate hikes are likely in the ongoing battle against inflation. Powell said that the additional increases would be necessary to return inflation to 2%, even though the Fed has already raised interest rates by 4.5% over the past year.
Advertisement
"We are seeing the effects of our policy actions on demand in the most interest-sensitive sectors of the economy," Powell said in his opening remarks. "It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation."
He also said that there had been some progress against inflation regarding total personal consumption expenditures and rent prices. The PCE price index, which captures inflation across a range of consumer expenses, declined to 5.4% in January, Powell said.
"And while housing services inflation remains too high, the flattening out in rents evident in recently signed leases points to a deceleration in this component of inflation over the year ahead," he added.
Powell said there was little sign of disinflation in the area of core services, which accounts for more than half of core consumer expenditures.
"To restore price stability, we will need to see lower inflation in this sector, and there will very likely be some softening in the labor market conditions," he said.
Powell is appearing in front of the Republican-led House Financial Service Committee on Wednesday as part of his twice-a-year visit to Capitol Hill to give legislators an update on the Fed's actions and how the economy is responding.
His remarks were similar to ones he gave on Tuesday to the Democratic-led Senate Banking Committee.
Powell warned the committee that "it will take time" for the economy to adjust to higher interest rates meant to lower inflation. Powell said, according to the fall in inflation from a high of 7%, the board felt the need at the end of last year to shrink the size of rate increases.
"We will continue to make our decisions meeting by meeting, taking into account the totality of the incoming data and their implications toward the outlook for economic activity and inflation."
Powell said "achieving price stability" is essential to establishing maximum employment and stabilizing prices long term. He said history has shown that prematurely lowering interest rates would unravel the work that has been done to corral inflation while bring as little harm to the economy and jobs as possible.
"We will stay the course until the job is done," Powell said. "We understand our actions affect communities, families and businesses across the country. Everything we do is in service to our public mission."
