![Fed Chairman Powell: Confidence in Return of Inflation Is Not as High as It Was](https://image.cnbcfm.com/api/v1/image/107414653-17156969081715696906-34522910728-1080pnbcnews.jpg?v=1715696907&w=750&h=422&vtcrop=y)
Chairman of the Federal Reserve Jerome Powell reiterated Tuesday that inflation declines more slowly than expected and will keep the central bank on hold for an extended period.
Addressing the annual general meeting of Foreign Bankers Association In Amsterdam, the central bank chief noted that the rapid disinflation that occurred in 2023 had slowed significantly this year and led to a rethinking of the direction policy would take.
“We didn't expect it to go smoothly. But those (inflation numbers) were higher than I think we expected,” Powell said. “What this told us is that we will have to be patient and let the restrictive policies do their job.”
Although he expects inflation to fall over the course of the year, he noted that has not happened so far.
“I think it's really about keeping politics at the current pace for longer than we thought,” he said.
However, Powell also reiterated that he does not expect the Fed to raise rates.
THE The Fed maintained its key overnight borrowing rate within a target range of 5.25% to 5.5%. Although the rate has been there since July, it is the highest level in 23 years.
“I don't think it's likely, based on the data we have, that the next action we take is to raise rates,” he said. “I think it's more likely that we'll get to a point where we keep the policy rate where it is.”
Markets are faltering as Powell spoke around 10 a.m. ET and the major averages were near break-even around noon ET. Treasury yields fell slightly and futures traders slightly increased the market's implied probability of a first Fed rate cut in September.
Powell's comments reflect sentiments he expressed during his May 1 news conference after the Federal Open Market Committee's last meeting.
The committee voted unanimously to maintain interest rates while expressing that it had seen a “lack of further progress” in bringing inflation back to the Fed's 2% target, despite a series of 11 interest rate increases.
Tuesday brought another round of discouraging inflation data, when the Department of Labor released inflation data. producer price indexa gauge of wholesale costs, rose a more-than-expected 0.5% in April thanks to a surge in service prices.
Although the index on its surface indicates further price pressures, Powell called the report “mixed” as some components showed slowing movement.
“Is inflation going to be more persistent in the future? (…) I don't think we know yet. I think we need more than a quarter of data to really make a case judgment on this,” he said.