Fed is prepared to raise rates further if needed, despite progress: Powell

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Investing.com -- The Federal Reserve is prepared to continue raising interest rates until it is convinced inflation is headed toward its 2% target, according to Chair Jerome Powell, who spoke Friday morning from the central bank’s annual meeting in Jackson Hole, Wyo.

While inflation is down from its peak, which Powell called a welcome development, “it remains too high,” he said. 

“We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

U.S. stocks were holding early gains as Powell began to speak. Stocks have surged this year on the hope the Fed was coming close to the end of its rate hiking. The S&P 500 is up 14% so far this year, and the NASDAQ Composite is up 29%. since the beginning of January.

There is still room for the Fed to hold steady on rates at the next rate policy meeting in September, however. “Given how far we have come, at upcoming meetings we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks,” he said.

Powell said the process still has a long way to go despite recent favorable economic data that showed prices cooling. 

“At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks,” Powell said. “Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.”

Futures markets continue to see the Fed holding rates at their current range of 5.25% to 5.50%. Traders put a 78% probability of a pause at the Fed’s September meeting, with a 43% probability of another rate increase in November.