Federal Reserve Chair Jerome Powell set the table for a 50-basis point rate hike at the Fed’s December policy meeting, saying in a speech on Wednesday it makes sense to “moderate” rate hikes as the Fed approaches its estimated peak in benchmark interest rates.
“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said in a speech at the Brookings Institution in Washington. “The time for moderating the pace of rate increases may come as soon as the December meeting.”
Powell added: “The full effects of our rapid tightening so far are yet to be felt.”
Powell reiterated the pace of rate hikes isn’t as important as how much further the Fed will raise its benchmark interest rate, and for how long the central bank will hold rates at elevated levels.
The Fed has raised the target range for its benchmark interest rate by 0.75% at each of its last four meetings. At the current target range of 3.75%-4%, the Fed’s benchmark interest rate is at the highest level since 2007.
“It is likely that restoring price stability will require holding policy at a restrictive level for some time,” said Powell. “History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.”
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