Jerome Powell
If the U.S. economy continues its robust growth, further rate hikes could be warranted, Federal Reserve Chair Jerome H. Powell said Nov. 9.
"We are attentive to the risk that stronger growth could undermine further progress in restoring balance to the labor market and in bringing inflation down, which could warrant a response from monetary policy," Powell said during an event hosted by the International Monetary Fund in Washington.
U.S. GDP grew at a 4.9% annualized pace in the third quarter, ahead of forecast projections, despite elevated interest rates designed to slow the economy.
The Federal Open Market Committee at its last meeting on Nov. 1 left the federal funds rate unchanged at a range of 5.25% to 5.5%. The Fed began raising the funds rate in March 2022, and it is now at its highest level since 2001 at 525 basis points. Since March 2022, the Fed has raised the funds rate, which is now at its highest level since 2001, 525 basis points.
The FOMC, Powell said, is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time. At this point, the committee is not confident that it has achieved such a stance, he added.
"We know that ongoing progress toward our 2% goal is not assured: Inflation has given us a few head fakes along the way," Powell said. "If it becomes appropriate to tighten policy further, we will not hesitate to do so."
The Fed has kept rates unchanged at its last two meetings, but has forecast one more rate quarter-point increase this year. The committee's final meeting of the year is slated for Dec. 12-13.
Shortly after Powell's remarks, market participants indicated there is a 86% probability that the Fed will leave rates unchanged at its next meeting, according to the CME FedWatch Tool that tracks trading in the 30-day fed funds futures.
Overall, inflation has been steady in recent months, and on Oct. 12 the Bureau of Labor Statistics reported that the consumer price index rose 3.7% year-over-year in September, the same pace as August. The next CPI numbers are due out Nov. 14.
Powell reiterated that the Fed will continue to move carefully to "address both the risk of being misled by a few good months of data, and the risk of overtightening. We are making decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation."
