Federal Reserve Chairman Jerome Powell said the Fed is more concerned with the appropriate interest rate target for combatting inflation than how quickly it continues to raise rates.
Although Powell opened the door to slowing the Fed’s pace of hikes, perhaps raising rates by a half point in December rather than another three-quarters of a point, he noted that the Fed still has a long way to go before interest rates are sufficiently high to bring inflation down to comfortable levels.
“We think there is some ground to cover before we meet that test,” Powell said. “That’s why we say ongoing rate increases will be appropriate. … We may move to higher levels than we thought.”
Powell reiterated that the Fed is taking into account the fact that it’s flying blind to an extent: The economic impact from monetary policy takes a while to kick in.
“That’s why I’ve said it’s appropriate to slow the pace of increases,” Powell said. “So that time is coming. And it may come as soon as the next meeting or the one after that. No decision has been made.”
But Powell made clear that “the question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restrictive.” In other words: even if the Fed slows its rate hikes down, it will continue to raise rates for quite some time.
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