The headline-grabbing U.S. jobs data from last week indicated that it would probably take some time to bring down the high inflation rate, but Federal Reserve Chair Jerome Powell said on Tuesday that he still anticipates a “substantial drop” in inflation this year.
Powell added that the Fed would need to maintain raising its benchmark interest rate this year due to the robust labor market and the enduring price pressures.
He did not say how many more rate increases he anticipated. However, during a news conference last week, Powell mentioned that he expected “a couple” more hikes in 2023.
The Fed chair warned that “disinflation is still in its very early stages despite lowering inflationary pressures.” It still has a ways to go.
Powell’s comments on Tuesday were in line with the relatively upbeat tone he had used in a news conference the week prior.
Powell told reporters that high inflation had started to reduce and that the Fed could control rising prices without inducing a severe recession with mass layoffs.
The Fed chair cautioned, however, that the labor market was still out of balance, with solid demand for workers and a shortage of workers in many areas forcing businesses to raise salaries significantly, a pattern that could contribute to maintaining high inflation.
The government released a startlingly inflated employment report on Friday, suggesting that the hiring climate and economy were considerably more robust than Fed officials had assumed. According to the study, employers created 517,000 new positions in January, nearly twice as many as in December, and the unemployment rate reached 3.4%, the lowest level in 53 years.