Federal Reserve Chairman Jerome Powell holds a news conference following the Federal Open Market Committee meeting at the William McChesney Martin Jr. Federal Reserve Board Building in Washington on March 22. He told Congress on Wednesday that more rate hikes are likely in the future to drive down inflation. File Photo by Ken Cedeno/UPI | License Photo
June 21 (UPI) -- Federal Reserve Chair Jerome Powell said Wednesday there will likely be more interest rate hikes before the end of the year because inflation is still well above where it should be despite having slowed.
In his opening comments during his semiannual monetary policy report to Congress, Powell said it could "take some time" for higher interest rates to slow the economy to the targeted 2%. He said he believes the economy is facing some headwinds with credit tightening and the Fed reducing its securities holdings.
"In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, we will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," Powell said in prepared statements.
"We will continue to make our decisions meeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks."
Powell said the continued efforts to bring down inflation will lead to "a period of below-trend growth and some softening of labor market conditions," but declined to use the word recession.
"Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run," he said.
Powell expressed his confidence in the U.S. banking market despite hiccups led by the closure of the Silicon Valley Bank earlier this year.
"The U.S. banking system is sound and resilient," Powell said. "The recent bank failures, including the failure of Silicon Valley Bank, and the resulting banking stress have highlighted the importance of ensuring we have the appropriate rules and supervisory practices for banks of this size.
"We are committed to addressing these vulnerabilities to make for a stronger and more resilient banking system."
In front of the House Financial Services Committee, the meeting will delve into recent economic and financial developments, the free Open Market Committee, projections and special reports.
Last week, the Federal Reserve declined to increase the benchmark federal funds rate above its current target of 5% to 5.25%, marking the second time this year that it did not raise interest rates following a meeting.