Powell On Inflation: “We Will Stay The Course Until The Job Is Done”


After officials at the Federal Reserve raised rates by 25 basis points, Chair Jerome Powell said that the fight against inflation isn’t over and he does not see them cutting rates this year.

During a press conference on Wednesday afternoon, Powell said the disinflationary process has started in some sectors of the economy but they remain cautious.

“Certainty is just not appropriate here. Inflation, it’s just hard to forecast inflation. It may come down faster. It may take longer to come down, and yet, our job is to deliver inflation back to target and we will do that, but I think we’re going to be cautious about declaring victory and sending signals that we think that the game is won because we’ve got a long way to go. It’s the early stages of disinflation,” Powell said.

Powell said it is their job to restore price stability and achieve 2% inflation for the benefit of the American people.

“We are strongly resolved that we will complete this task because we think it has benefits that will support economic activity and benefit the public for many, many years,” Powell said.

A statement issued on Wednesday from officials said in support of reaching their goals they decided to raise the target range for the federal funds rate to between 4.5 and 4.75%.

“The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time. In determining the extent of future increases in the target range, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the statement says.

The news comes as professionals in the housing market are ramping up for the spring selling season.

Powell noted during his statements that activity in the housing sector continues to weaken largely due to higher mortgage rates. Last week, Freddie Mac released data showing the 30-year fixed-rate mortgage averaged 6.13%.

Economists reacted to the Fed’s decision to raise rates again by focusing on easing inflation and the possibility of a recession.

Nadia Evangelou, director of real estate research at the National Association of Realtors, said in a statement that mortgage rates may slip below the 6% threshold.

“It’s clear that the Federal Reserve has already switched to smaller rate hikes as inflation is easing,” Evangelou said.

Evangelou said to “Stay tuned” for the release of the 30-year fixed mortgage rate by Freddie Mac on Thursday.

Orphe Divounguy, senior macroeconomist at Zillow Home Loans, said interest rates will remain volatile, but other factors will force them down.

“The large slowdown in domestic consumption at the end of 2022, continued weakness in manufacturing, lower than expected job growth, and declining consumer confidence all act to raise recession risk. The Federal Reserve’s decision to increase its benchmark interest rates by 25 basis points today and to telegraph a higher terminal rate was mostly anticipated by investors, likely reinforcing predictions for further decline in economic activity,” Divounguy said in a statement.

“Higher short-term rates generally push long-term rates up. But because the risk of recession has increased, longer-term rates like 10-year treasury bonds and 30-year fixed mortgage rates are falling. Upcoming releases on wage growth, the services industry, and inflation expectations are likely to keep mortgage rates volatile, but additional signs of weakness in economic data should continue to apply downward pressure.”

Follow Us On Twitter:

Read More Articles By Kimberley Haas:

Tenant Protections And Homelessness Addressed By Federal Officials

Remote Office Inspection Helps Financial Companies Comply With Laws And Agency Guidelines

Listen To The Mortgage Note Podcast