During Federal Reserve Chairman Powell’s semi-annual testimony to Congress this week, the nation’s top banker reiterated the FOMC’s collective view that more rate hikes are likely this year to further temper stubbornly elevated inflationary pressures. Indeed, the Chairman stated during prepared remarks that “inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go” and that “nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” echoing comments made last week when Powell and Company decided to refrain from raising the Federal Funds rate for the first meeting in 15 months. And it is this disconnect that many market participants characterize as mixed messaging- If inflation is still running at a pace not consistent with a discernable path towards 2%, then why did the FOMC unanimously vote to pause last week? Towards this end, the Chairman reiterated during this week’s testimony that “It will take time for the full effects of monetary restraint to be realized, especially on inflation,” and that “we judged it prudent to hold the target rate steady to allow the Committee to assess additional information and it’s implications for the monetary policy.”
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