Powell says rate hike size could shrink at December meeting

Speaking at a news conference following the Federal Open Market Committee meeting, Powell said when it comes to moving to smaller rate rises from the 75 basis point moves that have defined recent rate hikes, “that time is coming and it may come as soon as the December meeting,” Powell said, while adding “no decision has been made” yet on what action to take at next month’s FOMC gathering.

Chairman Jerome Powell cautioned against any sense the central bank will soon move to the sidelines with interest rate rises. “It is very premature to be thinking about pausing” on the effort to lift the federal funds target rate, Powell said. He spoke at a press conference following a Federal Open Market Committee meeting.

He said it will take time for the central bank rate hikes to bring inflation down, and that will necessarily lead to slower US growth. While the housing market has slowed, “It will take time… for the full effects of monetary restraint to be realized, especially on inflation,” he said, adding that the effort is “likely to require below-trend growth.”

Central bankers will begin discussing the possibility of slowing the aggressive pace of rate increases at their December meeting, but Powell dismissed criticism that policymakers moved too fast.

“It is very premature to think about pausing,” he told reporters.

The “ultimate level” of the Federal Reserve’s benchmark policy rate is likely higher than previously estimated, Powell said.

In remarks at a press conference after the Fed raised rates by 75 basis points for a fourth consecutive meeting, Powell said there is “significant uncertainty” around the level of rates needed to bring down inflation, but “we still have some ways to go.”