Powell says more ‘restrictions’ are coming, including hikes at consecutive meetings.
Jerome Powell, the chairman of the Federal Reserve, said at a forum Wednesday that he expects considerable interest rate increases in the near future. “We believe there’s more restriction coming,” Powell said during a monetary policy session in Sintra, Portugal. “What’s really driving it … is a very strong labor market.” Powell’s comments match those of his fellow policymakers at their June meeting. They also indicated a likelihood of another half-percentage point increase by 2023. Taking a quarter-point rise per meeting as a basis, that would equal two additional increases. Powell indicated in previous comments that the increases might occur at alternate meetings. However, he said Wednesday that it might not be the case depending on how the data is received.
Before taking a break in June, the Fed hiked at each meeting since March 2022, including four straight three-quarter point moves. “I wouldn’t take, you know, moving at consecutive meetings off the table,” he said during a question-and-answer session that occurred at a forum the European Central Bank sponsored. As Powell spoke, markets took a modest hit, with the Dow Jones Industrial Average off more than 120 points. Central to the Fed’s current thinking is the belief that the 10 straight rate hikes haven’t had time to work their way through the economy. Therefore, officials can’t be sure whether the policy meets the “sufficiently restrictive” standard to bring inflation down to the Fed’s 2% target. Most economists think rate increases are going to pull the U.S. into a shallow recession. “There’s a significant possibility that there will be a downturn,” Powell said, adding that it’s not “the most likely case, but it’s certainly possible.”