US Federal Reserve Chairman Jerome Powell has been vocal about inflation, saying he expects multiple interest rate hikes in the future and possibly at an aggressive pace.
“We think there will be more interest rates. What is really driving it is a very strong labor market,” Powell said during a monetary policy session in Sintra, Portugal.
Powell’s comments reiterate the position taken by fellow policymakers at their meeting in June, during which they indicated the possibility of another half-percentage-point increase through the end of 2023.
Powell’s previous comments indicated the potential for rallying at alternate meetings, though he said that may not be the case depending on how the data turns out
The Fed has risen at every meeting since March 2022, a period that included four consecutive moves of three-quarter points, before taking a break in June.
“I’m not going to, you know, take the transition in back-to-back meetings off the table,” he said. The question and answer session was held at a forum sponsored by the European Central Bank.
Markets took a modest hit as Powell spoke, as the Dow Jones Industrial Average fell more than 120 points.
Central to the Fed’s current thinking is the belief that 10 consecutive rate hikes have not had time to work their way through the economy. Therefore, officials cannot be sure if the policy meets the “restrictive enough” criterion to bring inflation down to the Fed’s 2% target.
Most economists believe that an interest rate hike will eventually drag the United States into recession.
“There is a very high probability that there will be a reversal, it is not the most likely case, but it is certainly possible”, Powell said.
