Federal Reserve Chair Jerome Powell Tells Congress More Rate Hikes Are On The Way | Eastern North Carolina Now

    Publisher's Note: This post appears here courtesy of the The Daily Wire. The author of this post is Ben Zeisloft.

    Federal Reserve Chair Jerome Powell warned lawmakers on Tuesday that the central bank would continue to increase the target federal funds rate as inflationary pressures remain elevated.

    Policymakers gradually hiked interest rates 4.5% over the past year amid a rollback in monetary stimulus implemented during the lockdown-induced recession. A robust labor market and persistent inflation in some product categories necessitate further rate hikes, Powell commented in prepared remarks before the Senate Banking Committee.

    "We continue to anticipate that ongoing increases in the target range for the federal funds rate will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive," he said. "We are seeing the effects of our policy actions on demand in the most interest-sensitive sectors of the economy. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation."

    The Dow Jones Industrial Average fell 1.2% and the S&P 500 Index fell 1% after the release of the prepared remarks.

    Rate hikes tend to increase borrowing costs for consumers and businesses, applying downward pressure to economic activity and price levels. Officials at the Federal Reserve announced a 0.25% increase in the target federal funds rate last month, marking a slowdown from the previous 0.75% and 0.5% rate hikes. Target interest rates presently sit between 4.5% and 4.75%.

    Powell affirmed that the Federal Reserve intends to encourage a 2% inflation rate, which had been largely maintained in the three decades preceding the lockdown-induced recession. The Personal Consumption Expenditures Price Index, the price level metric favored by the central bank, rose 5.4% between January 2022 and January 2023, while the version of the measure excluding more volatile food and energy categories rose 4.7% over the same time horizon, according to data from the Bureau of Economic Analysis.

    "As supply chain bottlenecks have eased and tighter policy has restrained demand, inflation in the core goods sector has fallen," Powell said in response to the data. "And while housing services inflation remains too high, the flattening out in rents evident in recently signed leases points to a deceleration in this component of inflation over the year ahead."

    Food prices have especially pressured American households in recent months: expenses for food at home increased 11.3% between January 2022 and January 2023, according to Consumer Price Index data released by the Bureau of Labor Statistics, while costs for food away from home rose 8.2% over the same period. A recent bout of the avian flu has decreased the size of poultry flocks, raising costs for chicken and turkey while causing a severe increase in egg prices.

    Real wages, which account for the effect of inflationary pressures, decreased 1.5% between January 2022 and January 2023. "Strong wage growth is good for workers but only if it is not eroded by inflation," Powell told lawmakers.

    President Joe Biden, who entered office when price levels were rising at a 1.4% rate, has reflected economic confidence over the past several months as headline inflation declined. "When I travel the country, I see optimism for this year and the years ahead," the commander-in-chief said in a statement from the White House. "We must finish the job in transitioning to stable and steady growth that benefits all Americans, while laying the foundation for strong and shared growth for years to come."