Fed chief: restrictive policy may continue for some time

WASHINGTON, Nov 30 (KUNA) -- US Federal Reserve Chair Jerome H. Powell expected on Wednesday that the Federal Reserve would go ahead with its restrictive monetary policy for some time to bring down inflation rate.
"It is likely that restoring price stability will require holding policy at a restrictive level for some time," Powell said in a speech on inflation and the labor market at the Hutchins Center on Fiscal and Monetary Policy, Brookings Institution, Washington.
"History cautions strongly against prematurely loosening policy. We will stay the course until the job is done," he vowed.
He clarified that the Fed needed to raise interest rates to a level that was sufficiently restrictive to return inflation to 2 percent.
"There is considerable uncertainty about what rate will be sufficient, although there is no doubt that we have made substantial progress, raising our target range for the federal funds rate by 3.75 percentage points since March," he said.
Powell disclosed that the Fed anticipated that ongoing increases would be appropriate.
"It seems to me likely that the ultimate level of rates will need to be somewhat higher than thought at the time of the September meeting and Summary of Economic Projections," he said.
He noted that monetary policy affects the economy and inflation with uncertain lags, and admitted that "the full effects of our rapid tightening so far are yet to be felt".
Powell argued that it makes sense to moderate the pace of Fed rate increases as the economy approaches the level of restraint that would be sufficient to bring inflation down.
"The time for moderating the pace of rate increases may come as soon as the December meeting," he forecasted.
He added that given the progress in the Fed tightening policy, the timing of that moderation is far less significant than the questions of how much further the Fed will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level.
Meanwhile, the Bureau of Economic Analysis announced today that US gross domestic product (GDP) grew at an annualized rate of 2.9 percent during the third quarter. In the second quarter, real GDP decreased 0.6 percent. (end) rsr.ibi