21-6-2023 (WASHINGTON) Jerome Powell, the Chair of the Federal Reserve, conveyed on Wednesday (Jun 21) that further increases in US interest rates are likely to be required in order to rein in the persistently high inflation. His statement comes ahead of two days of testimony on Capitol Hill where he will address Congress.
Powell’s appearances before the House and Senate follow closely on the heels of the Federal Open Market Committee’s (FOMC) decision to maintain the current interest rates, marking a pause after ten consecutive rate hikes within a span of just over a year.
In prepared remarks for the House of Representatives’ Committee on Financial Services, Powell stated, “Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year.”
Since March 2022, the Fed has already raised its benchmark lending rate by five percentage points, elevating it from near zero to a range between 5.0 and 5.25 percent.
However, despite these assertive measures, inflation continues to persist “well above” the Fed’s long-term target of 2 percent, Powell highlighted on Wednesday.
Powell’s scheduled appearance before Congress, where he will discuss the Fed’s semiannual report on monetary policy, presents an opportunity for policymakers to engage with the highest-ranking official of the central bank during a period of elevated interest rates and decelerating economic growth.
In conjunction with the interest rate decision made on Jun 14, the Fed also released updated economic projections, indicating that an additional half percentage-point increase may be necessary later this year.
Moreover, the Fed revised its GDP growth forecasts for 2023, raising the projection from 0.4 percent to 1.0 percent, signifying a more optimistic outlook.
According to the Fed, median inflation expectations for the year saw a slight decrease to 3.2 percent, while expectations for core inflation, which excludes volatile food and energy prices, rose to an annual rate of 3.9 percent.
