Fed Chair Powell says inflation has been higher than thought, expects rates to hold steady

Federal Reserve Chair Jerome Powell emphasized that inflation is decreasing more slowly than anticipated, necessitating extended restrictive monetary policy. Speaking in Amsterdam, Powell noted that the rapid disinflation of 2023 has slowed, requiring patience. He expects inflation to decline this year, but acknowledged it has not yet done so.
Powell indicated that the Fed’s key interest rate, held at 5.25%-5.5% since July, will likely remain unchanged for an extended period, though he does not foresee further rate hikes. His comments caused market fluctuations and slightly increased the probability of a rate cut in September. Recent data, including a higher-than-expected rise in the producer price index, highlights ongoing inflationary pressures, though some components showed easing. Powell stated that more data is needed to determine the persistence of inflation.