In a recent panel discussion in Amsterdam, Federal Reserve Chair Jerome Powell addressed the current state of the U.S. economy, highlighting that the central bank is unlikely to raise its key interest rate despite ongoing inflation concerns. Powell noted that although inflation has remained persistently high in the first quarter of the year, the Federal Reserve prefers to maintain its benchmark rate at its current high rather than implementing further increases.

"I don’t think that it’s likely, based on the data that we have, that the next move that we make would be a rate hike," Powell stated. "I think it’s more likely that we’ll be at a place where we hold the policy rate where it is.”

Financial markets and economists have been anticipating the possibility of rate cuts from the Fed this year. However, with continued price pressures, Powell and other Federal Reserve officials have indicated that a rate cut is not on the immediate horizon.

On the topic of the April U.S. producer prices report, which indicated a pickup in wholesale inflation, Powell stated: "I wouldn’t call it hot,” he said. “I would call it sort of mixed.” This comment came ahead of the consumer inflation report scheduled for release on Wednesday.

The Federal Reserve Chair also addressed the issue of rising rents as a significant factor in ongoing inflation, describing it as “a bit of a puzzle.” He pointed to the discrepancy between measures of new apartment leases, which show minimal increases, and broader government data that includes renewals of existing leases.

Additionally, Powell acknowledged the unique economic conditions resulting from many Americans and large businesses having refinanced their mortgages or secured low rates before the Fed's rate hikes began in March 2022. This situation could potentially reduce the impact of the Fed's rate policy on the economy.

AP Article