On December 14, Federal Reserve Chairman Jerome Powell said in a recent speech that although inflation has eased, there is still a risk of it being too high. In order to control inflationary pressures, the Federal Reserve has adopted a sharply tighter monetary policy. However, Powell noted that the Fed will continue to be cautious given the uncertainty in the economy and the progress that has been made.
At present, the Fed has taken a series of actions to bring the policy rate to a restrictive level. This measure has significantly slowed the pace of growth in economic activity, and the real estate market has gradually flattened. At the same time, a slowdown in nominal wage growth and higher interest rates have weighed on firms' fixed investment. Powell also noted that the policy rate is now at or near its peak. The Fed is prepared to tighten policy further in due course if the situation warrants it. Policymakers want to keep the possibility of continuing to raise interest rates, and specific policy adjustments will be made as needed, with no preset route. Powell stressed that they are well aware of the risks that may come with keeping interest rates high for an extended period of time and will do everything in their power to avoid such mistakes. A return to dual responsibilities is important for the Fed. When discussing the possibility of easing policy, Powell said that it is still in the preliminary stage and there has been no in-depth discussion on this. He noted that the policymakers in the interest rate expectation chart do not determine who is right about what they expect about future interest rates. As for the wage situation, Powell believes that the current level of wages is slightly higher than the level consistent with the 2% inflation target set by the Fed. The real wage situation is showing a positive trend, which may help improve consumer sentiment.