Chairman of the Federal Reserve Jerome Powell hinted that more interest rate hikes may be coming during a speech in Jackson Hole, Wyoming, on Friday.
Powell along with other central bank officials and finance and economics experts met for the annual Jackson Hole Economic Symposium last week to discuss the state of the economy and the Federal Reserve’s efforts to curb inflation. He said the U.S. may not have hit its interest rate peak yet.
“We have tightened policy significantly over the past year. Although inflation has moved down from its peak — a welcome development — it remains too high,” Powell said, according to a transcript of his remarks. “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.”
In order to rein in inflation to the Federal Reserve’s 2% target rate, the central bank has hiked the federal funds rate to 5.5%, the highest rate in over two decades. The Fed has also used its economic levers to pull money out of circulation in order to tamp down on economic activity and slow inflation. Despite its efforts, the economy continues to hum faster than expected, Powell said.
“So far this year, GDP growth has come in above expectations and above its longer-run trend, and recent readings on consumer spending have been especially robust. In addition, after decelerating sharply over the past 18 months, the housing sector is showing signs of picking back up,” the chairman said. “Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy.”
Powell’s uncertainty about the future of the American economy was seconded by other top central bank officials and experts at the conference.
Kristin Forbes, a professor at the Massachusetts Institute of Technology, said that the Fed’s current position is similar to a hiker attempting to summit a mountain when the trail has disappeared.
“You know where you want to go. You know where the summit is, but there are no more markers and you have to feel your way,” Forbes told The Wall Street Journal. “And even though you’ve covered most of the distance, that can be the hardest part. It’s steeper. It’s rockier.”
Cleveland Fed President Loretta Mester said the central bank is close, but it may need to raise interest rates at least one more time before it hits the peak.
“We are very close to a good point, and then we’ll let the economy tell us” when interest rates can start to come back down again, she told WSJ.