Powell Says Slower Pace Of Rate Hikes Could Come As Soon As December

Remarks by Federal Reserve Chair Jerome Powell on Wednesday provided further evidence the central bank plans to slow its aggressive pace of interest rate hikes as soon as next month.

Powell noted during a speech at a hybrid Brookings Institution event that the full effects of the Fed’s rapid rate increases have yet to be felt.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said in prepared remarks. “The time for moderating the pace of rate increases may come as soon as the December meeting.”

However, the Fed chief argued the timing of a slowdown in the pace of rate hikes is less significant than how much further the central bank will need to raise rates and how long it will be necessary to hold policy at a restrictive level.

“It is likely that restoring price stability will require holding policy at a restrictive level for some time,” Powell said. “History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.”

While the central bank seems likely to slow the pace of rate hikes, Powell suggested rates would likely need to be somewhat higher than predicted by Fed officials following the September meeting.

At that time, Fed officials forecast interest rates would peak at 4.6 percent in 2023 before being scaled back to 3.9 percent in 2024.

Powell reiterated the Fed’s plans to raise rates to a level that is sufficiently restrictive to return inflation to the central bank’s 2 percent target.

Noting that the path ahead for inflation remains highly uncertain, however, Powell said there is also considerable uncertainty about what rate will be sufficient.

The Fed’s next monetary policy meeting is scheduled for December 13-14, with CME Group’s FedWatch Tool currently indicating a 72.3 percent chance of a 50 basis point rate hike and a 27.7 percent chance of a fifth straight 75 basis point rate hike.

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