The US Federal Reserve expects to keep raising interest rates but at a slower pace, Fed chair Jerome Powell told a congressional hearing Wednesday.
"Given how far we've come, it may make sense to move rates higher but to do so at a more moderate pace," he told the House Committee on Financial Services.
The Federal Open Market Committee (FOMC) paused its aggressive campaign against inflation last week after 10 consecutive interest rate hikes, so as to give policymakers more time to assess the strength of the US economy.
"Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year," Powell said on Wednesday.
- 'Making progress' -
The Fed has already raised its benchmark lending rate by five percentage points since March 2022, from close to zero to a range between 5.0 and 5.25 percent.
Despite these aggressive moves, inflation remains well above the Fed's long-run target of two percent.
"We have a quite a ways to go, but we're making progress," Powell said.
"Inflation has consistently surprised us -- and essentially all other forecasters -- by being more persistent than expected," he added.
Wednesday's hearing was the first of two called on Capitol Hill to discuss the Fed's semiannual report on monetary policy.
Powell's congressional appearances give policymakers a chance to discuss bank policy at a time of high interest rates and slower economic growth.
- Two rate hikes ahead? -
The Fed published updated economic forecasts alongside its interest rate decision on June 14. These suggested that another half percentage-point of increases may be needed this year.
"Sixteen of the 18 participants on the FOMC wrote down that they do believe it'll be appropriate to raise rates, and a big majority" believe the Fed will need to raise rates twice more this year, Powell told lawmakers on Wednesday.
"I think that's a pretty good guess of what will happen if the economy performs about as expected," he added.
Speaking on Wednesday afternoon, Chicago Fed president Austan Goolsbee -- who is a voting FOMC member -- explained why he backed a pause at last week's meeting.
"For me, it still was a close call,” he said during a live event hosted by the Wall Street Journal.
"We're still in this weird, foggy environment, where it’s hard to figure out where the road is, and I felt like a reconnaissance mission is [a] perfectly appropriate thing to do after you’ve had 10 raises in a row," he added.
Goolsbee said the coming months should give policymakers a better indication of how the fight against inflation is going.
"We should be able to get readings 'yay' or 'nay' on the persistence of inflation," he said, adding he had not yet decided how he plans to vote during the FOMC's next meeting on July 25-26.
Futures traders are assigning a close-to 75 percent probability that the FOMC will vote to raise interest rates by a quarter percentage-point, according to data from CME Group.
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