Fed boss Jerome Powell's speech at Jackson Hole will be closely followed by investors
Powell spoke at an IMF event in Washington AFP

Federal Reserve Chair Jerome Powell said that, despite the progress on the fight against inflation, members of the Federal Open Market Committee aren't sure the current level of interest rates will be enough to bring inflation down to target.

"The Federal Open Market Committee is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time," Powell said in prepared remarks for an International Monetary Fund conference in Washington on Thursday. "We are not confident that we have achieved such a stance."

The Fed decided on Nov. 1 to keep the U.S. key interest rate unchanged in the range of 5.25% to 5.5%. It's the highest level in 22 years, after the rate was increased 11 times since early last year.

"We know that ongoing progress toward our 2% goal is not assured: inflation has given us a few head fakes," Powell said. "If it becomes appropriate to tighten policy further, we will not hesitate to do so."

Risks from growth

Inflation measured by the personal consumption expenditure index, the Fed's preferred inflation gauge, slowed to 3.4% in the 12 months through September from 7.1% in July of last year.

Powell also mentioned the risk that a stronger than expected economic growth could fuel inflation.

Gross domestic product expanded at an annual rate of 4.9% in the three months ended in September, boosted by consumer spending. It was the fastest growth since the 7% rate in the fourth quarter of 2021.

"We are attentive to the risk that stronger growth could undermine further progress in restoring balance to the labor market and in bringing inflation down, which could warrant a response from monetary policy," the Fed chair said. "We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data, and the risk of overtightening."

Other officials

Federal Reserve Governor Michelle Bowman gives her first public remarks as a Fed policymaker at an American Bankers Association conference in San Diego
Fed Governor Michelle Bowman Reuters

Earlier Thursday, Fed Governor Michelle Bowman also highlighted concerns on inflation and said she supports more interest-hike increases.

"I remain willing to support raising the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or is insufficient to bring inflation down to 2% in a timely way," Bowman said in a speech to New York Bankers Association's Financial Services Forum, in Palm Beach, Florida.

Richmond Fed President Thomas Barkin said that the economy will still show reactions to the current levels of interest rates.

"I do anticipate some sort of a slowdown, as I just have to believe the net impact of all this tightening will eventually hit the economy harder than it has," Barkin said in prepared remarks for an MNI webcast.