Federal Reserve Chairman Jerome Powell confirmed today, Wednesday, that more interest rate increases may be enacted in the future until further progress is made in reducing inflation.


In his testimony before the US Congress, the Fed chairman indicated that the rate-fixing move last week was likely just a short respite and not a sign that the Fed would stop.


Almost all FOMC participants expect it to be appropriate to raise interest rates somewhat by the end of the year, Powell said in prepared remarks for testimony before the House Financial Services Committee. ‏


Noting that inflation has subsided but remains well above the Fed's 2% target, Powell said he and his team still have more work to do.

He said: Inflation has decreased somewhat since the middle of last year. However, inflation pressures continue to mount, and the process of bringing inflation back to 2% still has a long way to go.

He added that the labor market still suffers from a shortage of workers, although there are indications that conditions are receding, such as an increase in labor force participation in the age group from 25 to 54 years and some moderation in wages.


However, he noted that the number of job vacancies still far exceeds the pool of available labour


He said: We have seen the effects of tightening our monetary policy on demand in the most sensitive sectors of the economy to interest rates. However, it will take time for the full effects of monetary restrictions to materialize, especially on inflation


And he said during the question and answer session with members of the committee: Given how far we have come, it may be logical to raise price rates, but to do so at a more moderate pace.


Powell said inflation expectations, which are a key variable that shows the direction of prices over time, are holding up well. ‏


For example, the closely watched University of Michigan Consumer Sentiment Survey showed that inflation expectations for the year now fell to 3.3%, the lowest level since March 2021.


The remarks also briefly touched on banking turmoil earlier in the year. Powell said this incident was a reminder that the Fed needs to ensure that its supervisory and regulatory practices are appropriate.