December 6, 2023

Federal Reserve Chairman Jerome Powell holds a news conference after the Federal Reserve’s interest rate policy decision in Washington, May 3, 2023.

Kevin Lamarque | Reuters

Federal Reserve Chairman Jerome Powell said on Friday that stress in the banking sector could mean interest rates don’t have to be as high to keep inflation in check.

Central bank leaders, speaking at a monetary conference in Washington, D.C., noted that the Fed’s moves to address mid-sized banks have mostly prevented the worst from happening.

But he noted that problems at SVB and others could still ripple through the economy.

He was in one on monetary policy.

“As a result, our policy rate may not need to rise as much to achieve our goals,” he added. “Of course, the extent of that is very uncertain.”

Speaking to markets, Powell mostly expected the Fed to pause its series of rate hikes that began in March 2022 at its June meeting. Yet pricing has been volatile, hitting a 41-year high last summer, as Fed officials weigh the impact that policy has had and will have on inflation.

Overall, Powell said inflation remains too high.

“A lot of people are experiencing high inflation right now for the first time in their lives. It’s not that they don’t really like the headline of it,” he said at a forum attended by former Federal Reserve Chairman Ben Bernanke explain.

“We believe that failure to reduce inflation will not only prolong the pain but ultimately increase the social costs of restoring price stability, causing more harm to households and businesses, and we aim to avoid this by remaining steadfast happen. Pursue our goals,” he added.

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