Powell: Fed Still Far From Reaching Inflation Target

Federal Reserve Chair Jerome Powell testified before the House Financial Services Committee yesterday and stated that the central bank is very far from its target inflation rate of 2%. He also said that the Fed is likely to raise interest rates in the coming months but at a more moderate pace. However, recent data suggests that inflation has not slowed as much as anticipated, with consumer inflation currently at 4% and the central bank’s preferred inflation gauge even higher at 4.7%. The Fed needs to balance raising borrowing costs to slow the economy down enough to cool inflation but avoiding too much growth that could lead to a recession. Powell’s team will make decisions meeting by meeting and stick to data-dependent moves. Goldman Sachs strategists advise investors to consider hedging for a potential recession, giving about a one-in-four shot of an economic downturn, which could bring the S&P 500 down as much as 23%.