Federal Reserve Chairman Jerome Powell sounded hawkish on inflation at a forum on Wednesday, saying he expects to raise interest rates many times ahead, and possibly at an aggressive pace.
“We believe there will be more constraints,” Powell told a monetary policy meeting in Sintra, Portugal. “The real driver is a very strong labor market.”
The comments reiterated a position taken by fellow Powell policymakers at their June meeting, where they said an increase of another half percentage point was likely by the end of 2023.
Assuming a one-quarter percentage point increase per session, that would mean two more increases. Powell’s previous comments pointed to the possibility of rate hikes at rotating meetings, though he said on Wednesday that might not be the case, depending on the source of the data.
The Fed has raised rates at every meeting since March 2022, including four hikes by three-quarters of a point before pausing in June.
“You know, I’m not going to take action in back-to-back meetings,” he said during an exchange hosted by CNBC’s Sarah Eisen. The question-and-answer session took place at a forum hosted by the ECB.
Markets took a small hit when Powell spoke, with the Dow Jones Industrial Average down more than 120 points.
Central to the Fed’s current thinking is the belief that ten rate hikes in a row have not had time to have an impact on the economy. As a result, officials were unable to determine whether policy was “sufficiently restrictive” to bring inflation down to the Fed’s 2 percent target.
Most economists believe that rate hikes will eventually push the U.S. into at least a shallow recession.
“A recession is very likely,” Powell said, adding that it wasn’t “the most likely scenario, but it’s certainly possible.”
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