Powell, Bank of England (BoE) Governor Andrew Bailey, European Central Bank (ECB) President Christine Lagarde and Bank of Japan (BoJ) President Kazuo Ueda spoke at the panel held within the scope of the “ECB Central Banking Forum” held in Sintra, Portugal.
Fed Chairman Powell, in his speech here, pointed out that they had raised interest rates by 500 basis points in just over a year, stating that he believed that more restrictions in monetary policy were coming, and the factor driving this was the strong labor market. Powell, who recalled that both interest rate increases were predicted, said that the reason for this was the stronger-than-expected growth seen when looking at the last quarter data, a tighter labor market and higher inflation.
POWELL: “SIGNIFICANT DECREASE IN INFLATION CAUSED BY RENTS”
Powell pointed out that new rents were seen to be at lower increases or not at all, and said that there was a significant decrease in inflation caused by rents, but this would take time. Noting that there had not been much progress in non-residential services, Powell stressed that this accounted for more than half of the core consumer price index.
Powell pointed out that signs of softening in labor market conditions were beginning to be seen, and said that conditions should soften a little more so that supply and demand were more compatible and inflationary pressures could begin to decrease.
FORECAST THAT CORE INFLATION WILL REACH 2 PERCENT IN 2025
Powell emphasized that he thought the Fed was constantly slowing down the pace of its movements, noting that the reason for this was to make better decisions with more information.
Powell stressed that he did not think they would return to 2 percent in core inflation this year or next year and thought they would reach this point in 2025, adding that they would be restrictive as long as necessary.
LAGARDE: “WE HAVE A LONG WAY IN THE FIGHT AGAINST INFLATION“
ECB President Christine Lagarde also noted that they had come a long way in the fight against inflation, raising interest rates by at least 400 basis points in less than a year.
Stressing that there was still a long way to go, Lagarde said, “As I have said before, we are dependent on data. We will decide from meeting to meeting, but we know that we have a long way to go, and we also know that if expectations are valid, we will probably raise rates again in July.”
