2% inflation far: Jerome Powell signals two straight interest rates hikes

Lagarde also talks tough, says not seeing enough sign of drop in inflation

Federal Reserve Chair Jerome Powell signaled policymakers could potentially raise interest rates in July and September to curb persistent price pressures and cool a surprisingly resilient US labor market.

Asked whether Fed officials now anticipate they will raise rates every other meeting after skipping a hike this month, Powell said that may or may not happen and that he wouldn’t rule out consecutive rate hikes. He reiterated that most policymakers’ forecasts show they expect to hike at least two more times this year.

“Although policy is restrictive it may not be restrictive enough and it has not been restrictive for long enough,” Powell said Wednesday during a panel hosted by the European Central Bank for a forum in Sintra, Portugal. The Fed chief spoke two weeks after he and his colleagues left interest rates steady after 15 months of increases to allow more time to evaluate how higher borrowing costs and recent banking strains are hitting the economy. 

Powell said he does not see inflation getting back to the Fed's 2 per cent target until 2025, though if it comes down sharply the Fed may not need to keep policy as restrictive for as long.  The European Central Bank probably won’t be able to declare the end of its historic cycle of interest-rate increases anytime soon, according to President Christine Lagarde. Signaling that officials in Frankfurt will retain a bias toward monetary tightening even if they pause their hiking campaign in the coming months, Lagarde also reiterated that July will bring a ninth straight boost to borrowing costs to bring down inflation.  

“It is unlikely that in the near future the central bank will be able to state with full confidence that the peak rates have been reached,” Lagarde said.