Fed's Powell: Prices are ‘back on disinflationary path,’ but more confidence is needed
KPMG chief economist Diane Swonk reacts to the Federal Reserve's decision to leave interest rates unchanged on 'The Claman Countdown.'
Federal Reserve Chair Jerome Powell said Tuesday that policymakers have made «quite a bit» of progress on fighting inflation, but he needs to see more evidence before starting to reduce interest rates.
Speaking during a central bank forum in Sintra, Portugal, Powell said inflation reports from April and May show price pressures are fading from the economy – and reiterated that the Fed wants that progress to continue.
«I think the last reading, and the one before it to a lesser extent, do suggest that we are getting back on a disinflationary path,» he said. «We want to be more confident that inflation is moving sustainably down to 2% before we start the process of loosening policy.»
Officials voted at their most recent meeting in May to hold interest rates steady at a range of 5.25% to 5.5%, the highest level since 2001. Although policymakers left the door open to rate cuts later this year in their post-meeting statement, they also stressed the need for «greater confidence» that inflation is coming down before easing policy.
FED HOLDS RATES STEADY AT 23-YEAR HIGH, PROJECTS JUST ONE CUT THIS YEAR
Federal Reserve Chair Jerome Powell responds to a question during a meeting of The Economic Club of Washington, at the Renaissance Hotel in Washington, D.C. (Amanda Andrade-Rhoades/File Photo / Reuters Photos)
Since then, there has been some evidence that inflation is starting to ease again. The May personal consumption index showed that inflation had cooled slightly to 2.6%, from a high of 7.1%. At the same time, core prices – which are more closely watched by the Fed because they strip out
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