MNI: Powell Says Nearly All FOMC Members See More Rate Hikes

Nearly all FOMC members think the Federal Reserve will have to raise interest rates "somewhat" further this year in order to bring inflation down to the central bank's 2% target over time, Fed Chair Jerome Powell will testify before the House Financial Services Committee Wednesday.

"Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year," Powell said in prepared remarks.

He said last week's decision to hold rates steady for the first time since March 2022 reflected "how far and how fast we have moved," adding that future decisions will be made on a meeting-by-meeting basis. The Fed kept rates steady at 5-5.25% but revised up the median forecast for the peak federal funds rate to 5.6%, from 5.1% in March.

Powell said inflation has moderated since the middle of last year but price pressures remain too high and that the Fed "has a long way to go" in getting back to the official 2% target.

He said the job market remains tight but cited some signs, including stronger labor force participation, that the supply of and demand for workers are getting back into better balance.

"We have been seeing the effects of our policy tightening on demand in the most interest rate–sensitive sectors of the economy. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation," he said. "The economy is facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain."