MNI BRIEF: Powell-Fed Gauging Whether More Tightening Needed

Federal Reserve officials are trying to figure out whether they have raised interest rates enough to put inflation on a sustainable path back to its 2% target, Fed Chair Jerome Powell said Thursday.

"We’re trying to make a judgement about whether we need to more," Powell said during a Q&A session at the IMF, where he also gave opening remarks. The fed funds rate is around 5.3% and if expected one-year ahead inflation is around 3%, that implies a real rate above 2%, well above mainstream estimates of the neutral rate, and "probably significantly restrictive," Powell said. (See MNI: Fed's Barkin Not Yet Convinced Inflation On Path To 2%)

The Fed is paying close attention to the recent spike in long-run bond yields but does not yet need to decide whether the tightening of financial conditions it represents will affect the course of monetary policy, Powell said. "We’re going to be looking at this question. It's not something we’re trying to make a decision on now."