Fed Chair Powell says prepared to tighten further if appropriate

In opening remarks to be presented by Federal Reserve Chair Jerome Powell at a Fireside Chat at Spelman College, the Chair plans to state: “As for price stability, the Federal Open Market Committee has a longer-run goal of 2 percent inflation. After running below 2 percent for over a decade, inflation increased sharply in 2021, in the United States and in many other countries around the world. High inflation imposes a significant hardship on all households and is especially painful for those least able to meet the higher costs of essentials like food, housing, and transportation. Beginning in early 2022, we reacted forcefully, raising our policy interest rate and decreasing the size of our balance sheet to help slow the economy and bring down inflation. Inflation has declined to 3 percent over the 12 months ending in October, but after factoring out energy and food prices, which tend to be volatile, what we call ‘core’ inflation is still 3.5 percent, well above our 2 percent objective… Monetary policy is thought to affect economic conditions with a lag, and the full effects of our tightening have likely not yet been felt. The forcefulness of our response to inflation also helped maintain the Fed’s hard-won credibility, ensuring that the public’s expectations of future inflation remain well-anchored. Having come so far so quickly, the FOMC is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced. As the demand- and supply-related effects of the pandemic continue to unwind, uncertainty about the outlook for the economy is unusually elevated. Like most forecasters, my colleagues and I anticipate that growth in spending and output will slow over the next year, as the effects of the pandemic and the reopening fade and as restrictive monetary policy weighs on aggregate demand.5 The FOMC is strongly committed to bringing inflation down to 2 percent over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective. It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so. We are making decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks.”