AUGUST 28, 2023 – POWELL WARNS RATES MAY NEED TO GO HIGHER
At the annual Jackson Hole Symposium last week, Fed Chair Jerome Powell said the Fed is prepared to raise rates higher if appropriate and will maintain high rates until they believe inflation is moving toward their targeted 2 percent.
Powell pointed out inflation has moved down from its peak but is still too high. They are wary that price pressures could reemerge, and as such, they will remain vigilant. The latest economic data has been favorable, and a recession has been avoided, for now. But recent readings on consumer spending have been robust, and combined with economic growth that has been stronger than expected, an uptick in inflation could occur.
Powell was unclear regarding the Fed’s next moves on monetary policy, rather saying they “will proceed carefully as we decide whether to tighten further or, instead, to hold policy rate constant and await further data.” In his speech, Powell did not mention any interest rate cuts. Earlier this year, the expectations were for rates to come down in the first quarter of 2024, but now, no cuts are expected before mid-2024 at the earliest. No rate hike is anticipated at the Fed policy meeting on September 19-20.