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Powell Asked Whether The Fed Anticipates 25BP Increments Going Forward

FED
  • Q: Do you anticipate 25bp increments going forward? How to determine when to stop?
  • A: Now that we're coming to the end of this year we've raised 425bp this year, into restrictive territory, it's not so important how fast we go - important to think what is the ultimate level. Then at a certain point, the question will become how do we remain restrictive. That applies to February as well. We'll make that decision based on the incoming data, where we see financial conditions..
  • Ultimately the Q about how high to raise rates looks at progress of where inflation and financial conditions are. We have an assessment that we're not as restrictive enough even with today's move, we laid out our individual assessments of what we would need to do to get there.
  • Powell then goes through his CPI in "three buckets" from the Brooking speech, says goods inflation coming down as expected; housing services "very very high and will continue to go up... but the rate for new leases is coming down so that inflation will come down sometime next year"; the third is non-housing related core services "the biggest cost by far in that sector is labor and we do see a very, very strong labor market... so the biggest part is likely to take a substantial period to get down."
  • "There is an expectation really that the services inflation will not move down so quickly so we may have to raise rates higher to go where we want to go. That's why we're running down the high rates and why we're expecting they'll have to remain high for a time. "
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