In a highly anticipated speech at the economic policy symposium in Jackson Hole, Wyo., Federal Reserve Chair Jerome Powell said inflation “remains too high” and that the Fed is “prepared to raise rates further” if need be.
“It is the Fed’s job to bring inflation down to our 2 percent goal, and we will do so,” Powell said. “We have tightened policy significantly over the past year. Although inflation has moved down from its peak — a welcome development — it remains too high. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”
Whether another rate hike happens at the Fed’s September meeting or later in the year remains to be seen.
“At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks,” he said. “Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.”
As far as housing, Powell said although there has been a market rent slowdown, “it takes time for a decline in market rent growth to work its way into the overall inflation measure. The market rent slowdown has only recently begun to show through to that measure.
“Going forward, if market rent growth settles near pre-pandemic levels, housing services inflation should decline toward its pre-pandemic level as well. We will continue to watch the market rent data closely for a signal of the upside and downside risks to housing services inflation.”
At the Federal Open Market Committee’s (FOMC) meeting July 25-26, members indicated another interest rate hike is a possibility.
“With inflation still well above the committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” the meeting’s minutes stated.