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- After 10 consecutive rate increases, the Federal Reserve paused its hiking cycle in June.
- At least two additional rate hikes are required this year, according to the Chair.
On Wednesday, during a panel discussion of central bankers organized by the European Central Bank (ECB) in Sintra, Portugal, Federal Reserve Chair Jerome Powell reinforced the Fed’s hawkish stance. Powell emphasized that the central bank is not finished managing inflation and indicated the likelihood of consecutive interest rate increases ahead of the next Federal Open Market Committee (FOMC) meeting on July 25-26. This follows a pause in June after ten straight rate hikes.
The Fed Chair stated:
“If you look at the data over the last quarter, what you see is stronger than expected growth, a tighter than expected labor market, and higher than expected inflation.”
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Powell noted that the Federal Reserve has not yet determined the timing or magnitude of future interest rate increases. Speaking at a Thursday event hosted by the Bank of Spain in Madrid, he elaborated, “We expect the moderate pace of interest rate decisions to continue.”
He stated that at least two more rate hikes this year are necessary to bring inflation down to the Fed’s 2% target. Powell added that it would be acceptable to lower rates when inflation is falling significantly, but noted that such a period is still a couple of years away.
Positive economic data, including a revised 2% GDP gain and a decline in weekly unemployment claims, provided potential support for the Federal Reserve’s intention to raise interest rates two more times in 2023. However, U.S. stock markets largely ignored these figures. These hawkish monetary policies have contributed to widespread market volatility over the past 12 months.
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