Fed chair calls lowering interest rates premature, and that more hikes may happen

US Federal Reserve Chair Jerome Powell on Friday indicated that lowering interest rates would be “premature” and that more rate hikes may happen in the coming months.

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” he said in a speech at Spelman College in Atlanta, Georgia. “We are prepared to tighten policy further if it becomes appropriate to do so.”

The Fed skipped an interest rate increase for the third time last month, keeping the federal funds rate in the 5.25%-5.5% target range – the highest in 22 years.

Many analysts believe that the Fed has come to an end in its unprecedented monetary tightening cycle during its fight against record inflation, which has been decelerating in recent months. After soaring to 9.1% in June last year, its highest in more than 40 years, annual US consumer inflation dropped to 3% this June but climbed to 3.7% in September.

Powell, however, said the Federal Open Market
Committee (FOMC) members are taking a wait-and-see approach.

“We are making decisions meeting by meeting, based on the totality of the incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks,” he said.

The Fed’s next two-day monetary policy meeting will conclude on Dec. 13, along with its economic projections.

The probability of a rate hike at that meeting only stands at 2.2% as of Friday, according to the FedWatch Tool provided by the US-based Chicago Mercantile Exchange Group.