Powell told members of the House of Representatives that there is still a “long way to go” to bring consumer price rises back down to the central bank’s target of a 2% annual rate despite the Fed’s decision to halt its campaign of interest rate hikes to combat inflation.
Powell’s remarks confirmed the traders’ belief that the Fed’s June decision was more of a pause than a stop to the rate rises that started in March 2022. He did, however, say that rate increases in the future could be less frequent than in previous months.
The procedure started earlier. The need for speed was crucial. Right now, it’s not that significant, he added. “Given how far we’ve come, it may make sense to raise rates, but do so at a more gradual pace,” the author writes.
The Fed has been increasing its interest rate, which affects the cost of borrowing for all types of loans, including credit cards, mortgages, and auto loans, in a bid to cool the heated inflation that set in during the pandemic’s recovery in 2021. The objective is to reduce borrowing and spending and restore equilibrium between supply and demand.
Over the span of a little more than a year, the Fed increased its rate from near zero at the height of the epidemic to a range of 5% to 5.25%, its highest level since 2007. As assessed by the Consumer Price Index, inflation has decreased dramatically throughout that period, from a 9.1% annual rate in June 2022 to 4% as of May.