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More hikes needed to beat inflation, says Fed boss Jerome Powell

More hikes needed to beat inflation: Federal Reserve boss Jerome Powell warns it is too soon to ‘declare victory’

US Federal Reserve chief Jerome Powell warned it was too soon to ‘declare victory’ in the fight against inflation even as the central bank slowed the pace of interest rate hikes.

Its quarter-percentage point increase was the latest rise since last spring – but lower than the half-point hike in December and the series of three-quarter point increases in 2022.

Powell said ‘the disinflationary process has started’ but a ‘couple more rate hikes’ would be needed. 

That lifted hopes that an end could soon be in sight for rises, with the New York’s S&P 500 recovering to turn higher after earlier falls.

US inflation has been falling since hitting a four-decade high of 9.1 per cent in June. In December it was 6.5 per cent.

Warning: US Federal Reserve chief Jerome Powell warned it was too soon to ‘declare victory’ in the fight against inflation

Powell said: ‘It would be very premature to declare victory or to think that we have really got this.’ 

He added ‘ongoing increases’ would be appropriate and that ‘substantially more evidence’ would be needed to show that inflation is on a downward path.

The Fed targets a 2 per cent inflation rate and was urged last month by Gita Gopinath, of the International Monetary Fund, to stay the course on rate hikes.

US rate rises have a global impact as they make debt repayments for nations and firms that have borrowed in dollars more expensive. 

They also make dollar-priced commodities such as oil dearer.

The US benchmark interest rate range is now 4.5-4.75 per cent. Last March the range was 0-0.25 per cent.

Richard Carter, analyst at Quilter Cheviot, said: ‘Investors should not confuse this as the end of the rate hiking cycle, instead a pause for breath.’ 

Rate rises are also expected today from the Bank of England and the European Central Bank.


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