United States Fed chair Jerome Powell on Wednesday said that lending rate hikes may continue in the future but at a slower pace.
Powell made this statement while speaking at a Congressional hearing on financial services.
“Given how far we’ve come, it may make sense to move rates higher but to do so at a more moderate pace,” Reuters quoted him as saying.
His comment comes a week after the US Fed voted to hold interest rates steady after 10 consecutive hikes since March 2022. The US central bank has raised its lending rate by five percentage points since last year.
In absolute terms, the lending rate has risen from close to zero to a range between 5.0 and 5.25 percent.
Powell called the Fed’s decision to not raise the interest rates on June 14 as an “exercise in prudence”. He added that the latest rate pause allows the Fed time to gather more information before deciding on further rate hike towards the end of the year.
Inflation remains a big issue
Despite the pause in the lending rate hike, Powell told the Congress that the Fed’s fight against inflation has a “long way to go”. Inflation continues to be well above the Fed’s 2 percent target.
“Inflation has moderated somewhat since the middle of last year. Nonetheless, inflation pressures continue to run high,” he told the House committee, as per a Reuters report.
As per reports, the US Fed’s median inflation estimates have fallen to 3.2 percent, while core inflation, which excludes volatile food and energy prices, is expected to rise to 3.9 percent this year.
The US Fed chief also waded into the ongoing debate on de-dollarisation – a term signifying countries switching to a currency other than the US dollar. He said that the US dollar will continue to be world’s reserve currency.
“The status of the United States of the dollar as the world’s reserve currency is a very important thing to us. I think the reason we have that status is largely due to our great democratic institutions, the rule of law, and the fact that we we have, generally speaking, had had strong levels of price stability,” Reuters quoted him as saying.
(With inputs from agencies)
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