Powell: Fed to proceed cautiously, open to further rate hikes.

Federal ⁤Reserve Chairman Jerome Powell Warns of Possible Interest Rate Hikes

Federal Reserve Chairman Jerome Powell delivered his highly anticipated ⁢annual address at the Jackson Hole Symposium, where ‌he discussed the possibility of more interest rate hikes. ‍While emphasizing that the central bank will proceed with caution, Powell left the door open for further tightening.

“At upcoming meetings, we will⁤ assess our‌ progress based on the totality of the data and the evolving ‌outlook and risks,” ⁣Powell stated. “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.”

Although this year’s speech ​was more subdued ​compared to last‌ year’s warning of potential “pain” resulting from tightening, Powell stayed consistent with his previous statements on future ‍rate ‍hikes.⁤ As a result, stock markets remained relatively unchanged following the address.

However, Powell ⁣did acknowledge that the series of rate hikes,‍ which have brought the Fed’s interest rate target to 5.25% to 5.50%, may lead to some economic slowdown and⁢ negative ⁢effects on the job market.

Commitment to Inflation Target

During his speech, Powell reaffirmed the ⁢Fed’s commitment to achieving ‌and ⁤sustaining ​a 2% inflation target. Despite suggestions from some economists to raise the target to 3%, Powell emphasized that 2% remains⁣ the benchmark.

Furthermore, Powell focused ‌on “core inflation,” which excludes volatile food and energy prices and ⁤serves as an indicator of sticky inflation. ‍While core inflation has shown some improvement​ in‌ recent⁤ months, Powell stressed the need for sustained progress to build⁣ confidence in achieving the Fed’s​ inflation goal.

Investor Expectations and Future Rate Cuts

Following the‌ speech, Brian Marks, executive director of the University of New Haven’s Entrepreneurship and Innovation Program, described the tone as ‍”somewhat hawkish.” However, most investors still ⁣anticipate the Fed to maintain steady rates at its September meeting.

According to ⁣CME Group’s FedWatch tool, approximately 83% of investors believe rates will remain unchanged. While the possibility ⁣of rate cuts in the⁢ future was not⁤ addressed⁢ by Powell, many investors predict that rates will ‌stay elevated into the ⁣next year.

Although recession odds have decreased compared⁢ to six months ago, ⁤economists like PNC⁢ chief economist Gus Faucher still anticipate an economic ‌downturn.‌ Faucher expects rate cuts to begin in the early spring of next year as‍ the‍ economy⁣ enters a ⁢mild recession.

It is worth noting that Powell did not‍ mention the word “recession” during ​his address, ‍but he did acknowledge the potential for below-trend economic growth.

During the last meeting of central ‍bank officials, it was revealed that Fed staff no longer expect a recession.‌ This announcement is significant considering that⁣ just a few months ago, Fed ⁢staff had projected ⁢a mild recession for this year.

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