MNI: Fed's Powell Says Consecutive Rate Hikes Still Possible

Federal Reserve Chair Jerome Powell said Wednesday interest rates could be raised further to bring inflation back to target and officials are making meeting-by-meeting decisions including a potential return to consecutive increases.

"We’ve come a long way, we also think there’s a lot of tightening power coming through. We haven’t been restrictive for that long. We believe there’s more restriction coming," said Powell during a panel discussion at European Central Bank's Sintra forum.

The Fed hasn't committed to any particular pattern of rate increases such as hiking at every other meeting, he said.

"We have not made a decision to go to that. It may work out that way. It may not work out that way. But I wouldn't take moving at consecutive meetings off the table at all," he said. (See MNI INTERVIEW: Fed's Bostic Wants Rates On Hold Until End 2024)

"A tighter-than-expected labor market is driving spending and demand and "reallypullingtheeconomy," he added. "Sothattellsusthatalthoughpolicyisrestrictive,itmaynotberestrictiveenough,andithasnotbeenrestrictiveforlongenough."

RECESSION CHANCES

Powell said an economic downturn is possible but not assured given the Fed's aggressive rate tightening, which took interest rates from effectively zero to 5-5.25% in just over a year.

"In my view, the least unlikely case is that we do find our way to better balance without a really severe downturn. There's a significant probability that there will be a downturn" but "it to me is not the most likely case."

The Fed Chair said the central bank is closely watching risks to the financial system from the commercial real estate sector, which is suffering from not just higher interest rates but also a post-pandemic shift away from office space.

(Additional reporting by Jean Yung and Evan Ryser)