“Inflation remains very high, and a few months of good data is just the beginning of what is needed to build confidence that inflation continues to move toward our goal,” Powell said during a conference in New York. protesters.
As measured by the Fed’s favorite gauge, headline inflation has “more than halved” since peaking in June last year, but remains stuck above its long-term target of 2%.
Some independent economists consider that the data offered by the Federal Reserve is too optimistic about the reality suffered by tens of millions of Americans.
Forecasts put inflation at 3.3% for this year, 2.5% in 2024 and 2.2% in 2025, but prices for consumers remain too high for these numbers to match the current situation.
“We still don’t know how long these low readings will continue, or where inflation will strengthen in the coming quarters,” Powell added, later stressing that the Fed would remain “cautious” on its decisions.
Measured over 12 months, the consumer price index (CPI) in the United States remained at 3.7% in September, according to the Department of Labor, and the monthly record for that month showed that inflation slowed for the first time since May, with 0.4% compared to 0.6% in August.
“Doing too little will allow higher-than-target inflation to take hold. Doing too much can also cause unnecessary damage to the economy,” he said.
The Federal Reserve remains against the wall
Recently, the Fed eased its aggressive monetary tightening campaign that raised the benchmark interest rate to a 22-year high, as it seeks to control inflation without pushing the US economy into a economy, something that economists also doubt. negative.
In September it kept rates unchanged, as expected by markets, in a range of 5.25 to 5.50%.
A reversal of the recent contraction in labor supply and weakening wage growth may cause the Fed to reconsider its current rate freeze.
If the US economy behaves in this way, “it may put further growth in inflation at risk and may justify further tightening of monetary policy” by the Fed, which he considers “tight -toon,” said Powell.
Futures market traders are currently assigning a more than 95% probability that the Fed will keep interest rates steady on November 1, after its next meeting, according to CME data. Group.
Powell also stressed that “geopolitical tensions are very high and there is a great risk to global economic activity” in reference to the armed conflict between Israel and Hamas, describing as “terrible” the actions launched by the Palestinian Islamist movement against Israeli civilians.
He added that the role of the Fed is to monitor the economic consequences of these events.
Many analysts have expressed concern about a possible extension of the Israel-Hamas conflict at the regional level in the Middle East, an area that is very rich in crude oil and therefore has implications for oil production.
