‘Inflation’ statement from Fed Chairman Powell: If we lower the interest rate, expensiveness will return
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Powell attended the San Francisco Fed’s Macroeconomics and Monetary Policy Conference. Evaluating the core personal consumption expenditures price index data announced today in the USA, which the Fed considers as an inflation indicator, Powell said:
“My first thought was that the data released this morning was quite in line with our expectations.”
said.
Powell stated that the personal consumption expenditures price index increased by 2.5 percent annually and the core personal consumption expenditures price index increased by 2.8 percent annually.
“This is what we expected and it’s nice to see that it lived up to expectations.”
he said.
“Inflation is in the direction we want to see”
“Inflation is in the direction we want to see”
Noting that they obtained data that they would describe as good in the second half of last year, Powell stated that they received much higher inflation data in January of this year, and that in February, they received lower but not as low as the good readings in the second half of last year. Powell,
“But it’s definitely in the direction of what we want to see.”
he said.
Reiterating that they will start reducing interest rates when the Federal Open Market Committee (FOMC) is sure that inflation has fallen to 2 percent sustainably, Powell emphasized that they need better inflation data, as was the case last year, to achieve this confidence.
“If we cut interest rates too soon, there is a possibility that inflation will return.”
“If we cut interest rates too soon, there is a possibility that inflation will return.”
Powell stated that they did not overreact to the progress made in reducing inflation and said, “We need to see more.” made his assessment.
Pointing out that the decision to start reducing interest rates is very important, Powell stated that the risks are two-sided.
The Fed President continued:
“If we cut interest rates too soon, there is a possibility that inflation will return and we may have to go back, which would be very devastating. This would not be a good thing for the economy. There is also a risk that we wait too long. This could cause unnecessary harm to the economy and perhaps the labor market.” can give.”
Powell stated that monetary policies are well positioned and said:
“I think where we are right now, we’re in a position to handle any situation.”
he commented.
“I don’t think interest rates will return to historical lows.”
“I don’t think interest rates will return to historical lows.”
Regarding the slightly higher inflation data in January and February, Powell reminded his expectations that inflation will decrease to 2 percent on a bumpy road.
Powell responded to a question about whether the economy is ready for 4.6 percent interest rates.
“We don’t know what interest rates will return to when this is all over.”
he replied.
Fed Chairman Powell
“I don’t think interest rates will go back to the historically very low levels they were before the pandemic. I think interest rates will probably be lower than they are now.”
” he said.
“The banking system is in good shape right now”
“The banking system is in good shape right now”
Powell noted that the likelihood of a recession is not high, that the US economy is in a good place and that there is no reason other than “humility” to think that we are on the verge of a recession.
Stating that shrinking the bank’s balance sheet is not the main issue of monetary policy, Powell said that when they encounter difficult and different situations such as the pandemic or the global financial crisis, they buy treasury bills to reduce interest rates and support the economy, and that they shrink the balance sheet when the time comes.
Powell stated that they said they would slow down the pace at a certain point, and the reason for this was that they were downsizing quickly.
Recalling that there was a period of stress in the banking system a year ago, Powell explained that the banking system in the country is now in a good place and things have calmed down significantly in the banks.
Powell stated that he thinks the commercial real estate problem will last for a few years and said:
“But that’s just an issue for some banks and mostly smaller banks; the very large banks don’t have commercial real estate concentrations.”
he said.
Pointing out that these banks need to make sure they have sufficient capital and that they work together to overcome the problems, Powell said that he thinks the process will improve.
Powell emphasized that the US economy is growing at a solid pace and the labor market is strong,
“These give us a little more confidence that inflation will fall before we take a significant step like lowering interest rates. So we won’t take this step until we’re confident. We don’t think it’s appropriate to do that.”
said.
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