Powell: US interest rate cuts should wait for inflation to subside

But Powell said he shared his colleagues’ broad economic outlook of modest economic growth, slightly rising unemployment and slowly declining inflation for the rest of the year.

It is that prospect, he added, that led most central bank officials to feel that one or two more rate hikes would be adequate to end the bank’s fight against inflation.

“If all of those things happen, we’re a couple of rate hikes away from the level we need to get to,” Powell said.

no clear consensus

But the opinion is not universally shared, neither outside the Fed nor within it.

Fed Governor Michelle Bowman, while not specifying her estimate of how high the central bank might need to move rates, said on Thursday that more “rate hikes” were needed, signaling that she believes they are justified by minus two more raises. Three Fed officials feel it will take more than that.

By contrast, Atlanta Fed President Raphael Bostic said Wednesday that he feels rates don’t need to rise at all from the current range of 5% to 5.25%, a view shared by only one other of the 18 policymakers. of the Fed’s monetary policy, according to the most recent Summary of Economic Projections.

At the Senate hearing, Democratic lawmakers also questioned Powell about why rates should go up, given the potential risks to the economy.

Opening his second day of appearances before the US Congress, Powell faced questions from Democratic Senator Sherrod Brown, chairman of the Senate Banking Committee, about the likelihood that the Fed’s efforts to control inflation will cause a disproportionate loss of jobs for members of racial and ethnic minority groups.

“What Fed governors call ‘cooling down,’ regular people where I live call layoffs,” Brown said, opening a hearing dominated by Republican lawmakers who questioned the Fed’s plans to tighten banking regulations.

“It’s working families who suffer most directly and most quickly from inflation,” Powell responded.

With information from Reuters and AFP.