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Fed Chair Powell says he expects slower rate hikes to continue




Jerome H. Powell, the central bank’s chairman, said Thursday he would expect to continue at a slower pace of rate hikes after central bank governors skipped raising interest rates in June for the first time in 11 policy meetings — but he did not rule. out that officials could return to back-to-back rate movements.

“We may not move for a meeting, and then move for a meeting,” Mr. Powell said.

Speaking at a conference in Madrid, he repeated a claim he made a day earlier that he would not take future rate hikes “off the table” at subsequent meetings. But he added that he expects a more patient approach to persist.

“We took one meeting where we didn’t move, so it’s kind of moderating the pace,” he explained. “So I expect that kind of thing to continue, assuming the economy develops roughly as expected.”

However, Mr. Powell noted that the economy “tends to do something different” than policymakers expect.

Fed officials raised interest rates quickly in 2022, producing a series of three-quarter-point increases. They slowed to a half-point move late last year, and have gradually moved toward smaller, and now more intermittent, adjustments.

Raising interest rates is like putting the brakes on economic growth: It slows down consumer and business demand to bring down inflation. Lifting speeds more gradually is like pressing less firmly on the brake pedal. Fed officials are still slowing the economy, but they are trying to avoid an unnecessarily jarring halt.

For now, central bankers expect to raise the policy rate twice more in 2023, from just above 5 percent to just above 5.5 percent. If these movements occur at a different meeting pace, it could mean interest rate increases at the central bank’s meetings in July and November.

But significant clouds of uncertainty as warnings. Investors place a low – but rising – probability of two more rate hikes by the end of the year. They bet the Fed is more likely to make just one more rate hike in 2023 as the economy slows and inflation cools.

Mr. Powell noted that the Fed has repeatedly erred in the other direction, overestimating how quickly rate hikes moderate.

“We have all seen that inflation – time and time again – has proven to be more persistent and stronger than we expected,” he said.

“It would not have been conceivable to have an interest rate of 5 percent before the pandemic,” he added later. “And now the question is – is it a tight enough policy?”



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