Federal Reserve Chair Jerome Powell said the US central bank is "proceeding carefully" as it considers the path of policy, and is prepared to raise interest rates again if policymakers see further signs of resilient economic growth.
"Given the uncertainties and risks, and how far we have come, the committee is proceeding carefully," Powell said in prepared remarks Thursday to the Economic Club of New York. "We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks."
Powell also pointed to tightening financial conditions, driven by a rise in longer-term bond yields, and said "persistent changes in financial conditions can have implications for the path of monetary policy."
Powell's comments will likely affirm market expectations for the Federal Open Market Committee to hold interest rates steady for a second straight meeting when policymakers meet on Oct. 31 and Nov. 1. That would be the first consecutive skip in their 19-month campaign to tame inflation.
Yields on both 2- and 10-year Treasuries declined after Powell's remarks were released, while the dollar fell against a basket of major currencies. The S&P 500 index of stocks rose.
Officials left their policy rate unchanged last month in a range of 5.25% to 5.5% and their forecasts showed 12 of 19 officials wanted one more hike this year. Powell was careful not to rule out the possibility of further tightening in his remarks.
At the same time, recent economic data showed US retail sales exceeded forecasts and industrial production strengthened in Septebmer, while nonfarm payroll gains have averaged 266,000 over the past three months, a robust pace.
Powell said the FOMC is "committed to achieving a stance of policy that is sufficiently restrictive to bring inflation sustainably down to 2% over time" and holding it there until inflation is on that path, he said.
Three- and six-month measures of core inflation are running below 3%, Powell said, but he warned that short-term measures are often volatile.
Source : Bloomberg
