(Washington) The Fed’s main key rate, which has been climbing for a year to curb inflation, could continue to rise above 5.1%, the level at which officials at the institution have seen it so far. stop, warned its president Jerome Powell on Tuesday.
“The most recent economic data is stronger than expected, suggesting that the final level of interest rates is likely to be higher than expected,” the Fed Chairman told a Senate committee.
Fed officials released their latest forecasts in December, and will update them on March 21-22, at their next meeting.
After several very large rate hikes, the Fed had raised them at a slower pace, even returning on 1er February after its last meeting, at the usual rate of increase of a quarter of a percentage point.
But the tide could again be reversed, warned “Jay” Powell: “If all the data were to indicate that a faster tightening is justified, we would be ready to accelerate the pace of rate hikes”.
“Although inflation has moderated in recent months, the process of reducing inflation to 2% will be long and probably bumpy,” said the head of the powerful US Federal Reserve.
To combat high inflation in the United States, the Fed has been raising rates for the past year from the 0 to 0.25% range they were in during the pandemic, to support the economy through consumption, now at 4.5-4.75%.
Raising rates increases the cost of credit for households and businesses, and must therefore curb consumption, to ease the pressure on prices.
But despite these efforts, consumption remained solid, and inflation even rose again in January, to 5.4% over one year, according to the PCE index, favored by the Fed, and which it wants to bring back. around 2%.
Another measure of inflation, the CPI index, which is a benchmark and on which pensions are indexed, for its part showed a slight slowdown, to 6.4% over one year, against 6.5% in December, accelerating however over one month for the first time since September, to 0.5% against 0.1%.
This should also weigh on employment, but the unemployment rate in January was at its lowest in over 50 years, at 3.4%.
One of the governors of the Fed, Christopher Waller, had indicated on Thursday that he would support a hike in the key rate to above 5.4% in the coming months, if inflation does not slow more quickly. , and the labor market remains tight.