Powell Reiterates Fed Likely to Keep Rates Higher for Longer

Federal Reserve Chair Jerome Powell said the US central bank needs to be patient as it awaits more evidence that high interest rates are curbing inflation, doubling-down on the need to keep borrowing costs elevated.

Powell reiterated it will likely take longer than previously thought to attain the confidence needed to lower interest rates, echoing remarks made following the Fed’s latest meeting on May 1. He described current rates as restrictive by “many, many measures” but noted time will tell if policy is sufficiently restrictive to bring inflation back to the Fed’s 2% target.

“We think about the effect of the things we’re doing on financial conditions more broadly and on the economy,” Powell said Tuesday during an event hosted by the Foreign Bankers’ Association in Amsterdam. “All of those things lead us to believe at this time that policy is restrictive, and that it looks like it will take longer for us to become confident that inflation is coming down to 2% over time.”

“We think that it’s probably a matter of just staying at that stance for longer,” he added.

During the moderated discussion between Powell and European Central Bank Governing Council member Klaas Knot, the Fed chief reiterated it wasn’t likely that the Fed’s next move will be a rate hike. Powell added it’s more likely that the Fed will just keep the policy rate where it is.