Fed’s Powell: Continued Robust Hiring Could Lead to More Rate Increases
WASHINGTON (AP) – Federal Reserve Chair Jerome Powell said Tuesday that the Fed may need to raise interest rates higher than it now forecasts if the job market continues to recover in the coming months or if inflation rates accelerate .
Powell’s comments followed last week’s blockbuster report from the government that employers added 517,000 jobs in January, nearly double the previous month. The unemployment rate fell to 3.4%, its lowest level in 53 years.
“The reality is, if we continue to get strong jobs reports or higher inflation reports, we may have to raise rates more” than is now expected, Powell said in a note to the Economic Club of Washington.
Although price pressures are easing and Powell said he sees a “significant” fall in inflation this year, he cautioned that “these are the very early stages of disinflation. She still has a long way to go.”
Powell’s comments on Tuesday followed the moderately optimistic note he struck at a news conference last week. Speaking to reporters, Powell noted that high inflation has gradually eased and said he believes the Fed can rein in rising prices without triggering a deep recession with waves of layoffs.
But the Fed chair warned at the time that the job market was still out of whack, as resilient labor demand and underemployment in many industries prompted employers to raise wages sharply, a trend that could help to keep inflation high.
On Friday, the government released a jobs report that suggested the economy and the hiring rate were even healthier than Fed officials had thought. Employers added 517,000 jobs in January, the report said, nearly double the December figure, and the unemployment rate hit 3.4%, its lowest level in 53 years.
Christopher Rugaber, The Associated Press
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