(Bloomberg) — Federal Reserve Chair Jerome Powell said the latest consumer price data show that while the central bank has made substantial progress toward taming inflation, there is still more work to do.
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“I would say we’re close, but not there on inflation,” Powell told the House Financial Services Committee Wednesday in response to a question on the second day of his semi-annual testimony to Congress. “Last year, inflation was 2.6% — so great progress — but we’re not quite there yet,” Powell said, referencing a different inflation gauge than the consumer price index, which came out earlier Wednesday.
“So we want to keep policy restrictive for now,” he added, suggesting interest rates will remain elevated for the foreseeable future.
Wednesday’s fresh data showed consumer prices grew by more than anticipated at the start of the year. The so-called core consumer price index — which excludes food and energy costs — increased 0.4% in January, the largest advance since March.
Following the new data, interest-rate swaps showed traders expected just one quarter-point rate cut this year. Before the CPI report, traders were leaning toward two cuts.
Powell acknowledged the CPI reading came in above nearly every forecast, but he cautioned against over-reacting.
“We don’t get excited about one or two good readings, and we don’t get excited about one or two bad readings,” he said.
Nonetheless, the new data add to years of price increases, exacerbating the ongoing hardship for millions of Americans struggling to stretch their paychecks to cover a higher cost of living. They also underscore the difficulty the Fed has encountered in finishing off the post-covid price surge.
Powell’s single-minded goal has been to stifle inflation after it surged to a four-decade high in 2022, and without significantly damaging growth and jobs. A so-called soft landing after an inflation burst is rarely achieved and would be a remarkable victory.
Trump Policies
Getting there may also be complicated by President Donald Trump’s plans to impose widespread tariffs, cut taxes and restrict immigration.
Trump ordered a 25% tariff on steel and aluminum imports earlier this week, adding to a 10% duty on all Chinese imports and now-delayed levies on goods from Canada and Mexico. He’s also threatened reciprocal tariffs against countries with levies on US imports.