The president of the American central bank (Fed), Jerome Powell, estimated on Wednesday that the key rates should continue to increase in the coming months, but “at a slower pace”, after a pause at the last meeting.
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“Given how far we’ve come, it may make sense to raise rates, but to do so at a more moderate pace,” the chairman of the US Federal Reserve said during his hearing before a committee of the US House of Representatives. .
“Virtually everyone” on the Federal Reserve’s Monetary Policy Committee “expects it to be appropriate to raise interest rates somewhat further by the end of the year,” he said. he still indicated.
On June 14, the Fed marked a pause in its key rate hikes, for the first time since March 2022, and after 10 hikes, by 5 points in total. Rates are now in the range of 5 to 5.25%.
Jerome Powell has already mentioned the likelihood of one or more additional rate hikes in the coming months, but less strong than those of the past year.
“At last week’s meeting, given where we were coming from and how fast we’ve been moving, we thought it prudent ‘to keep rates where they were, to ‘allow’ Fed officials” assess the information and its implications for monetary policy,” Powell said.
These rate hikes, which lead commercial banks to increase the cost of their loans to households and companies, aim to slow down economic activity, in order to ease the pressure on prices and slow down inflation.
This remains “well above our long-term objective of 2%”, further indicated the President of the Fed.
Thus, “to determine” how much further monetary policy tightening will be necessary to achieve this objective, the Fed will “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation , as well as economic and financial developments,” he added.
But “reducing inflation will likely require a period of below-trend growth,” Mr. Powell further warned.
The next Fed meeting will be July 25-26.