(AURN News) – Despite progress, stubborn inflation still weighs on American consumers as the Federal Reserve maintains its campaign to bring prices under control. Households are still grappling with high costs at the grocery store and gas pump.
Speaking at the Stanford Business, Government, and Society Forum, Fed Chair Jerome Powell acknowledged that while inflation has fallen from last year, it remains above the Fed’s 2% target.
“Growth in economic activity and employment was strong in 2023, as real gross domestic product expanded more than 3 percent and 3 million jobs were created, even as inflation fell substantially,” Powell stated.
He also emphasized that the Fed would not consider lowering interest rates until officials have greater confidence inflation is moving. “On inflation, it is too soon to say whether the recent readings represent more than just a bump. We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent. Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”
Powell cited positives like healing global supply chains, rising labor force participation, and strong GDP growth of over 3% in 2023 as the economy added 3 million jobs. “In addition, labor supply increased significantly, thanks to rising participation among 25-to-54-year-olds, as well as a strong pace of immigration,” he said.
However, he cautioned that the Fed walks a tightrope when it comes to curbing inflation. The path forward remains uncertain, Powell warned. “On inflation, it is too soon to say whether the recent readings represent more than just a bump. We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent. Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”
Cutting rates too quickly risks re-igniting price pressures, but over-tightening could constrain the economy. But for Americans still bearing the brunt of high inflation, fresh relief may not arrive any time soon as the battle to restore price stability drags on.
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