The Fed: Powell says jobs report shows Fed needs to keep raising rates, but he expects ‘significant’ slowdown in inflation

by | Feb 7, 2023 | Stock Market

Federal Reserve Chairman Jerome Powell expects “significant declines” in U.S. inflation in 2023, but he also said a surprisingly strong jobs report in January underscores the need to keep raising interest rates. “We think we need to do further rate increases,” Powell said in an interview Tuesday at the Economic Club of Washington. “And we think that we’ll need to hold policy at a restrictive level for a period of time.”

Wall Street economists say Powell largely stuck to his prior script that the Fed was making progress in its fight against inflation, but there is more work to do.” “January’s jobs data didn’t really change Chair Powell’s message,” said chief economist Bill Adams of Comerica. “The important takeaway is that Powell had a chance to signal a shift to a more aggressive posture and he didn’t take it.” Several other senior officials at the Fed, on the other hand, said this week the central bank might need to raise interest rates somewhat higher to help subdue inflation in the wake of the January jobs report. The U.S. gained an estimated 517,000 jobs last month, defying expectations of a big slowdown in employment. The unemployment rate fell to a nearly 54-year low of 3.4%. The Fed has been raising interest rates to bring down high inflation, a strategy that rests in part in slowing the economy enough to cool off the labor market. Senior Fed officials worry a shortage of labor will continue to drive up worker pay and add to inflation pressures, making it harder to get prices back under control. After the Fed raised interest rates again las …

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