Fed Chair Powell sees progress on inflation, though not quickly enough

WASHINGTON (AP) — Inflation may be cooling — just not yet fast enough for the Federal Reserve.

Chair Jerome Powell offered a nuanced view Wednesday of how the Fed intends to address its core challenge at a time when inflation is both way below its peak but still well above the central bank’s 2% target: Give it more time, and maybe some help from additional interest rate hikes.

Yet on a hopeful note, Powell also suggested that the trends that are needed to further slow inflation, from lower rents to slower-growing wages, are starting to click into place.

As a result, the Fed decided Wednesday to forgo another increase in its benchmark interest rate, leaving it at about 5.1%. The pause followed 10 straight hikes in 15 months — the fastest series of increases in four decades.

By leaving rates alone, at least for now, Powell and other top Fed officials hope to use the extra time to more fully assess how higher borrowing rates have affected inflation and the economy. They also want to see whether the collapse of three large banks this spring will weigh on lending and growth.

In a surprisingly hawkish signal, the Fed officials issued projections Wednesday showing they envision as many as two additional quarter-point rate hikes before the year ends. (Hawks generally favor higher rates to quell inflation, while doves typically advocate lower rates to aid a healthy job market.) Before this week’s policy meeting, Fed watchers had expected the officials to signal just one more rate increase this year.

In their new projections, the members of the Fed’s interest-rate committee were less divided than many economists had expected, with 12 of the 18 policymakers foreseeing at least two more quarter-point rate increases. Four favored one quarter-point hike. Only two envisioned keeping rates unchanged. The policymakers also predicted that their benchmark rate will stay higher for longer than they had envisioned three months ago.

Powell noted that many economists expect rental costs, a key driver of current inflation, to steadily decline in the coming months. He also said wage growth has slowed and noted some signs that the job market is cooling. Those factors, he added, should reduce inflationary pressures.

“I would almost say that the conditions that we need to see in place to get inflation down are coming into place,” Powell said. “But the process of that actually working on inflation is going to take some time.”

Panorama Hispano is the regional news and information newspaper for Hispanic and other diverse communities.

US Hispanics are now the largest ethnic minority in the United States numbering 54.2 million as of July 2014. Serving: Buffalo, Rochester, Fredonia, Niagara Falls, NY and Erie, PA. Outside our Market area: Visit our affiliate at: http://www.impremedia.com/

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