ANKARA, July 28 — US Federal Reserve Chair Jerome Powell said Wednesday that another “unusually large” interest rate increase is possible at the central bank’s next meeting in September, Anadolu Agency (AA) reported.
“While another unusually large increase could be appropriate at our next meeting, that is a decision on the data we get between now and then,” Powell said at a news conference after the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to the 2.25 per cent – 2.5 per cent range with a hike of 75 basis points.
That was after the Fed increased its benchmark interest rate by another 75 basis points on June 15 – the largest hike in 28 years.
Powell called the current rate increase the “right magnitude” based on macroeconomic data but said the FOMC would not hesitate to make a larger rate hike move.
But he indicated that increases could slow at some point.
“It will likely be appropriate to slow the pace of increases, while we assess how our cumulative policy adjustments are affecting the economy and inflation,” he said.
Powell noted that the Personal Consumption Expenditure (PCE) price index, the Fed’s preferred inflation indicator, annually rose 6.3 per cent in May, saying “supply constraints have been larger and longer than anticipated and price pressures are evident across a broad range of goods services.”
“My colleagues and I are strongly committed to bringing inflation back down and we are moving expeditiously to do so,” he said.
He also said the continued strength of the labour market suggests that underlying aggregate demand in the American economy remains “solid.”
While the Fed’s aggressive monetary tightening has created fears of a recession in the world’s largest economy, Powell tried to calm those worries.
“I do not think the US is currently in a recession. The reason is that there are too many areas of the economy that are performing too well,” he said.
“There is a very strong labour market. It does not make sense that the economy would be in a recession with this kind of thing happening,” he added.
The US economy contracted 1.6 per cent in the first quarter, while the first reading of the second quarter gross domestic product (GDP) will be released Thursday.
“The slowdown in the second quarter is notable, we are going to be watching that carefully,” said Powell.