DXY - Fed Chairman: 'Inflation is still too high'

Oct 20, 2023

Federal Reserve Chairman Jerome Powell said that although inflation has cooled, the Fed remains committed to achieving its 2% target.
In a speech in New York on October 19, Chairman Jerome Powell acknowledged that tightening policy had brought inflation back under control, but stressed that the Fed must remain cautious in pursuing its goals. .
“Inflation remains too high. A few months of positive statistics are just the beginning of giving us confidence that inflation will return to target. But it remains to be seen how long these positive numbers will last, or how inflation will fare in the coming quarters. I don't know yet whether that will happen." He reiterated that Fed officials are "unanimously committed to bringing inflation down to 2%."
The speech raises questions about the Fed's future policy after a series of consecutive interest rate hikes. The Fed has raised interest rates 11 times since March 2022, and the current interest rate is 5.25%. This is the highest level in 22 years.
However, Chairman Powell believes that current interest rates are not too high. "Are the guidelines too strict? I don't think so," he said, but acknowledged that "rising interest rates are making things difficult for everyone."
The Fed also highlighted recent good progress on its goals. The inflation rate as of September was 3.7%, a significant drop from over 9% in the middle of last year. "The latest figures show progress on both our goals of maximum employment and price stability. The economy remains in very good shape."
But the comments came on the same day as reports showed the number of people applying for unemployment benefits last week was the lowest since the start of the year. This indicates that the labor market is tightening, which could put upward pressure on inflation.
In recent days, a number of Fed officials have said the Fed may temporarily pause rate hikes. Even the most pro-tightening members expect the Fed to wait for further economic impact from its last rate hike. The market now expects the Fed to halt rate hikes, at least for now.
The question is when will they start cutting interest rates? “If the environment remains risky and uncertain, we will be more cautious. The Fed will make decisions based on upcoming data, prospects and risks,” Powell said.