Federal Reserve Chair Jerome Powell said officials were not close to ending their aggressive campaign of interest-rate increases after officials signaled borrowing costs would head higher than expected next year.
“We still have some ways to go,” he said at a press conference on Wednesday in Washington after the central bank downshifted its rapid pace hikes. He said that the size of the rate increase delivered on Feb. 1 at the Fed’s next meeting would depend on incoming data, leaving the door open to another half-percentage point move or a step down to a quarter point.
“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said.
The Federal Open Market Committee raised its benchmark rate by 50 basis points to a 4.25% to 4.5% target range. Policymakers projected rates would end next year at 5.1%, according to their median forecast, before being cut to 4.1% in 2024—a higher level than previously indicated.
“The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time,” the FOMC said in its statement, repeating language it has used in previous communications.
Treasury yields rose, the S&P 500 index dropped and the dollar index pared losses on the day as Powell spoke.
Investors had been speculated that the Fed would soon pause its hikes after financial conditions eased. Until Wednesday, stocks had risen, while mortgage rates and the dollar had fallen since Powell last month suggested a policy shift was coming. They’d also bet rates would reach about 4.8% in May, followed by cuts totaling 50 basis points in the second half of the year.
The vote was unanimous.
“It is our judgment today that we are not at a sufficiently restrictive policy stance yet,” the Fed chief said. “We will stay the course until the job is done.”
Powell had previously signaled plans to moderate hikes, while emphasizing that the pace of tightening is less significant than the peak and the duration of rates at a high level.
The decision follows four consecutive 75 basis-point hikes that have boosted rates at the fastest pace since Paul Volcker led the central bank in the 1980s.
Consumer-price increases have begun a more pronounced slowdown from their 40-year high earlier this year. But a growing cadre of economists expect the Fed’s aggressive action to tip the U.S. into recession next year.
Such concerns have drawn lawmaker criticism, with Democratic senators Elizabeth Warren, Bernie Sanders and Sheldon Whitehouse warning that rate hikes risk “slowing the economy to a crawl.”