"New Federal Reserve News Agency": Powell will not close the "interest rate hike door"

On Friday, Beijing time, Nick Timiraos, a financial journalist known as the "mouthpiece of the Federal Reserve" and the "new Federal Reserve news agency," wrote an article stating that even if the Federal Reserve continues to hold steady, it still retains the option to raise interest rates unless there is concrete evidence that inflation is further slowing down.

Federal Reserve Chairman Powell has not provided a reason to raise interest rates, nor will he close the door to further rate hikes.

In the early hours of Friday, Powell stated at a meeting of the International Monetary Fund (IMF) that he lacked confidence that policy had been tightened enough to bring inflation down to 2%. He reiterated caution but stated that if appropriate, the Federal Reserve would not hesitate to raise interest rates.

Although recent price and wage pressures have eased, leading more investors to believe that the Federal Reserve's rate hikes are nearing an end, Powell's speech overnight was disappointing.

While Powell did not provide a reason to raise rates at this time, he mentioned the "illusion" of early inflation, citing examples of temporary easing of price pressures followed by unexpected rebounds. He stated that the Federal Reserve would closely monitor economic conditions to avoid being "misled by a few months of good data" and to avoid the risk of excessively high interest rates.

To curb inflation, the Federal Reserve has already raised interest rates to the highest level in 22 years. At the interest rate meeting held last week, the Federal Reserve announced that it would maintain the current target range for the federal funds rate at 5.25%-5.50%. This was the first time the Federal Reserve had paused rate hikes twice in a row since starting the rate hike cycle in March last year, and it was the third pause this year.

The Federal Reserve will hold its final interest rate meeting of the year on December 12-13. Regarding this, Timiraos stated:

Powell has left ample room to maintain interest rates in December or to raise them again if the economy and inflation do not slow down as widely expected next year.

In his prepared remarks at the IMF meeting, Powell stated that the Federal Reserve is "uncertain" whether it has raised rates enough to bring inflation down to the 2% target over the next two to three years.

However, during the Q&A session, Powell admitted that the post-inflation adjustment interest rates are indeed high. He said:

Our current policy is restrictive, possibly significantly restrictive, and we are carefully observing its impact on the economy.

According to the non-farm payroll report released by the U.S. Department of Labor last week, the unemployment rate in October rose slightly from 3.8% in September to 3.9%, but it increased by more than 0.5 percentage points from the low point in April. This indicates that the labor market is still strong, but demand for labor has slowed in recent months.

At the same time, inflation pressures this year have cooled down. According to data released by the U.S. Department of Commerce, the core inflation rate from April to September rose by 2.8% compared to the same period last year, a significant drop from the recent peak of 5.6% last year. Powell said that the Fed is encouraged by this progress, but expects that the process of stabilizing inflation at 2% will not be easy. Benefiting from the easing of supply bottlenecks and an increase in job seekers this year, US inflation has gradually slowed down while the economy has maintained some resilience.

However, Powell warned that if these favorable conditions on the supply side have passed, further reducing inflation may be more difficult. He said:

We know that achieving the 2% inflation target is still far from certain.