Powell Says Fed Won’t Hesitate to Tighten More If Appropriate

(Bloomberg) — Federal Reserve Chair Jerome Powell said the US central bank won’t hesitate to tighten policy further if appropriate and reiterated that the central bank isn’t fully confident that it has tightened enough to return inflation to 2%.

“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” Powell said in brief opening remarks at an International Monetary Fund conference in Washington. “We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening.”

Powell said policymakers are committed to returning inflation to their 2% target, but “are not confident that we have achieved such a stance.”

US central bankers are trying to assess whether they need to take their benchmark policy rate slightly higher, and debating how long they should hold rates at elevated levels. The policy-setting Federal Open Market Committee last week held rates at 5.25% to 5.5% range, the highest level in 22 years.

Inflation has decelerated, but remains above the Fed’s target at 3.4% for the year ending September. Fed officials are set to meet again on Dec. 12-13.

The Fed chief also said it wasn’t clear how much more inflation progress can be made in the future through supply-side improvements.

“Going forward, it may be that a greater share of the progress in reducing inflation will have to come from tight monetary policy restraining the growth of aggregate demand,” he said.

Traders are betting that the Fed is at the peak of its hiking cycle and will begin cutting rates next year.