Citing earlier data showing that inflation has reversed the deceleration in late 2022, Powell warned of tighter monetary policy ahead.
on Tuesday cautioned that interest rates are likely to head higher than central bank policymakers had expected.it showed in late 2022, the central bank leader warned of tighter monetary policy ahead.
Those remarks carry two implications: One, that the peak, or terminal, level of the federal funds rate is likely to be higher than the previous indication from the Fed officials, and, two, that the switch last month to a smallerIn their December estimate, officials pegged the terminal rate at 5.1%. Current market pricing is a bit higher than that, in the 5.25%-5.5% areas, according to CME Group data. Powell did not specify how high he thinks rates ultimately will go.
The Fed has raised its benchmark fund rate eight times over the past year to its current targeted level between 4.5%-4.75%. On its face, the funds rate sets what banks charge each other for overnight lending. But it feeds through to a multitude of other consumer debt products such as mortgages, auto loans and credit cards.
"Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time," Powell said. "The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done."However, he also noted "there is little sign of disinflation" when it comes to the important category of services spending excluding housing, food and energy.
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