U.S. Federal Reserve Chair Jerome Powell has warned that the central bank is willing to raise interest rates further should inflation remain high and the economy stay strong.
“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” Powell said at an International Monetary Fund (IMF) event.
Fed officials have been careful not to declare victory on inflation for fear that consumer prices could rise even more and remain above the central bank’s 2% annualized target.
Inflation in the U.S. is currently at 3.7%, down from a peak of 9.1% in June 2022. However, consumer prices in America rose for three consecutive months between June and August of this year.
“We are not confident that we have achieved such a stance,” Powell said. “We know that ongoing progress toward our 2% goal is not assured.”
The central bank head’s latest remarks are a signal to markets that the Fed is unwilling to say that its rate-hike cycle is finished, despite raising interest rates only once since June of this year.
The latest speech was more hawkish than Powell’s last comments on Nov. 1, where his remarks were interpreted by traders and investors to mean that the central bank is likely to hold interest rates steady at its final policy meeting of the year on Dec. 13.
After Powell spoke, markets priced in an 85% chance that the Fed will hold rates steady in the current range of 5.25% to 5.5% at the December meeting, down from 90% earlier in the day.
Markets did not react favorably to Powell’s latest comments, with all three U.S. stock indices finishing trading in the red, breaking a previous nine day win streak.
