Fed Chair Powell says rates may not have to rise as much as expected to curb inflation

cnbc.com:

Federal Reserve Chair Jerome Powell said Friday that stresses in the banking sector could mean that interest rates won't have to be as high to control inflation.

Speaking at a monetary conference in Washington, D.C., the central bank leader noted that Fed initiatives used to deal with problems at mid-sized banks have mostly halted worst-case scenarios from transpiring.

But he noted that the problems at Silicon Valley Bank and others could still reverberate through the economy.

«The financial stability tools helped to calm conditions in the banking sector. Developments there, on the other hand, are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring and inflation,» he said as part of a panel on monetary policy.

«So as a result, our policy rate may not need to rise as much as it would have otherwise to achieve our goals,» he added. «Of course, the extent of that is highly uncertain.»

Powell spoke with markets mostly expecting the Fed at its June meeting to take a break from the series of rate hikes it began in March 2022. However, pricing has been volatile as Fed officials weigh the impact that policy has had and will have on inflation that in the summer of last year was running at a 41-year high.

On balance, Powell said inflation is still too high.

«Many people are currently experiencing high inflation, for the first time in their lives. It's not a headline to say that they really don't like it,» he said during a forum that also featured former Fed Chairman Ben Bernanke.

«We think that failure to get inflation down would, would not only prolong the pain but also increase ultimately the social costs of getting back to price stability, causing even greater harm to families and