June 28th, 2023 7:24 PM by Narbik Karamian
Washington, DC-CNN —
Federal Reserve Chair Jerome Powell doubled down Wednesday on the hawkish view that the central bank isn’t done with fighting inflation and could even implement further rate hikes at its upcoming monetary policy meetings.
“If you look at the data over the last quarter, what you see is stronger than expected growth, a tighter than expected labor market and higher than expected inflation,” Powell said during a central banker panel hosted by the European Central Bank in Sintra, Portugal. “That tells us that although policy is restrictive, it may not be restrictive enough and it has not been restrictive for long enough.”
Powell said officials haven’t decided how and when they will raise rates again, including if they will hikes rates at every other meeting or do back-to-back rate hikes.
“I wouldn’t take moving at consecutive meetings off the table at all,” he said.
The Fed’s position could mean as many as two more quarter-point rate hikes sometime this year, according to the latest Summary of Economic Projections. But it’s not clear at what meeting officials will vote to raise interest rates, especially given that they won’t learn much about the economy before their upcoming meeting in July.
Some Fed officials have made it clear in recent speeches that inflationary pressures persist, pointing to core inflation, which excludes volatile food and gas prices, not decelerating as fast as overall inflation. At the European Central Bank (ECB) conference in Sintra, Powell echoed that sentiment pointing to services inflation — which includes labor-intensive businesses such as restaurants and health care facilities — remaining stubbornly high.
Powell said part of the reason why Fed officials voted to hold rates steady had to do with the bank stresses that emerged in the spring.
“Part of the decision, in my thinking anyway, was the bank stress that we experienced earlier this year,” he said. “There’s a fair amount of research showing that when something like that happens, bank-credit availability and credit can move down a little bit, with a bit of a lag, so we’re watching carefully to see whether that does appear.”
The Fed’s latest survey of senior loan officers showed that banks were toughening their lending standards even before the bank failures. Powell argued that it’s still unclear whether that intensified after the turbulence in March.
Economists and some Fed officials have said that bank stresses can have the same effect on financial conditions as a rate hike.
This is a good time for homeowners who currently have HELOC’s with balances that carry a high interest rate to either strategize to pay them off or consider converting into a HELOAN with a fixed interest rate before the rates on HELOC’s go any higher.