The U.S. Federal Reserve has made “considerable progress” in its fight against rising prices and could hit its inflation target next year, Fed Chairman Jerome Powell said on Tuesday.
The U.S. central bank raised interest rates to a 23-year high as it tries to tighten monetary policy enough to bring inflation back to its long-term goal of two percent without causing much damage to either the labor market or the broader economy.
Since starting to raise rates in 2022, the Fed has brought inflation back from a multi-decade high to an annual rate of 2.6% in May, while growth has remained positive and the unemployment rate has remained at near-record lows.
“We have made good progress in reducing inflation to our target, while the labor market has remained strong and growth has continued,” Powell said at an event in Sintra, Portugal, which was streamed online. “We want this process to continue.”
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He added that it was possible the Fed would hit its two percent target “maybe late next year” or in 2026.
“The main thing is that we are making real progress,” he said.
In last month’s rate decision, the Fed made just one rate cut for this year and said it did not expect inflation to reach 2% until 2026.
Investors believe there is about a 70 percent chance the U.S. central bank will begin cutting interest rates by mid-September and see a second rate cut more likely by the end of the year, according to CME Group Data.
Powell was also asked about support for Fed independence during the discussion in Sindra with European Central Bank President Christine Lagarde and Brazil’s central bank chief Roberto Campos Neto.
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Donald Trump has repeatedly criticized Powell, who he appointed, saying he might cut interest rates to prop up Democrats ahead of November’s presidential election.
But Powell insisted on Tuesday that the Fed was focused solely on doing its job under a dual mandate from Congress: to promote maximum employment and stable prices.
“I think support for Fed independence is very high where it really matters on Capitol Hill, in both political parties,” he said. “And so I worry about doing the job right.”
Source: AFP