The Fed raised its policy rate by 25 basis points, as expected. Fed Chairman Jerome Powell, who held a press conference after the meeting, made the following statements:
- “Inflation remains well above our longer run goal of 2%. Inflation has moderated somewhat since the middle of last year, nonetheless inflation pressures continue to run high and the process of getting inflation back down to 2% has a long way to go.”
- On the pause in rate hikes, Powell said that “a decision on a pause was not made today”. Powell also said that the resilience in the labor market continues. Powell added that the unemployment rate in the country is lower than when rate hikes began, and that the Fed continues to monitor the labor market closely.
- Powell said further rate hikes are still possible, adding that the Fed could continue to raise interest rates if economic data points the central bank in that direction.
- “The run on Silicon Valley Bank was out of keeping with the speed of runs through history. And that now needs to be reflected in some way in regulation and in supervision.”
- Powell said it may be too early to cut rates and that demand and labor market conditions will probably need to weaken a little more to see progress within non-housing services and consider rate cuts “appropriate”.
- Powell said the first signs of weakness in the labor market imply that the path of a “soft landing” for the U.S. economy is not off the table. “There are no promises in this, but it just seems to me that it’s possible that we can continue to have a cooling in the labor market without the big increases in unemployment that have gone with many prior episodes.”
- Powell said that the Fed will tighten monetary policy further if necessary.
- Powell also said the banking sector is resilient and has recovered since the beginning of March, but that supervision and regulation need to be strengthened. On JPMorgan’s acquisition of First Republic, Powell said that “it’s actually a good outcome for the banking system”.
