Fed chief confident of victory in the fight against inflation - but goal not yet achieved
The Federal Reserve, from the perspective of its chairman Jerome Powell, will ultimately win the fight against high inflation. He is "fairly optimistic" that the Federal Reserve's goal of a 2% inflation rate will be achieved, Powell said in the Financial Services Committee of the US House of Representatives. Despite the recently declining inflation, he is not yet ready to speak of a sustainable retreat towards the target value.
At a hearing in the other chamber, the Senate, the Fed chief had said that more "good data" were necessary to strengthen confidence.
Many investors are counting on a rate cut in September, as signals of an economic slowdown have recently strengthened. Powell described the labor market as still robust and made progress in fighting inflation. However, the Federal Reserve, in his view, has no hurry with a rate cut, as long as the conditions are not met.
Despite progress in the fight against inflation, price increases are still significantly stronger than the Fed's target of a 2% inflation rate.
The Federal Reserve particularly pays attention to the price development of a fixed basket of goods, which is based on personal consumer expenditures in the US. This inflation measure - the PCE Index - showed a year-on-year rate of 2.6% in May, after 2.7% in April. However, the relatively high living expenses continue to burden consumption: Consumer prices (CPI) rose by 3.3% in May. For the consumer price data expected on Thursday for June, a decrease in the rate from 3.3% in May to 3.1% is expected.
- Jerome Powell, as the Fed Chairman, believes that despite some progress, the Federal Reserve still needs to fight to bring inflation down to its 2% goal, despite it being lower than earlier.
- The Fed Chairman, Jerome Powell, stated during a hearing that while the labor market is robust and progress is being made in fighting inflation, the Federal Reserve is not yet ready to achieve its goal of 2% inflation buttressing his stance with the ongoing high consumer prices.
- The Federal Reserve's target of a 2% inflation rate, as stated by the Fed Chairman Powell, is not yet achieved, despite his positive outlook, as inflation remains significantly higher than the set goal.
