Powell: Inflation Has “Long Way to Go”

The fight to get inflation down to the Federal Reserve’s 2% target “has a long way to go,” Federal Reserve Chairman Jerome Powell said Wednesday, according to Reuters (subscription).

What’s going on: In testimony before the House Financial Services Committee, Powell said that “‘[i]nflation pressures continue to run high’” and “‘nearly all’ participants expect further rate increases will be appropriate by the end of the year.”

Last week at its June meeting, the Fed kept the target federal funds rate unchanged at 5.00% to 5.25%, five times higher than it was in March 2022.
Investors expect the central bank to raise rates next month.

Why it’s important: The Fed’s 10 consecutive interest-rate raises over the past 15 months have not had a large impact on the broader economy.

“‘We have been seeing the effects of our policy tightening on demand in the most interest-rate-sensitive sectors of the economy,’” Powell said, citing housing as one example.
“‘It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation,’” he continued.