Federal Reserve Chairman Jerome Powell predicted a “significant” inflation decline in 2023 during a speech delivered Tuesday.
Powell spoke at the Economic Club of Washington, D.C., with David Rubenstein, co-founder of private equity firm Carlyle Group, CNBC reported. He is a former partner at the firm. Powell addressed slowing inflation and his long term outlook in his speech.
Powell on getting inflation down: “This process is likely to take quite a bit of time. It’s not going to be, we don’t think, smooth. It’s probably going to be bumpy.” https://t.co/Y9ytqNdVun
— Nick Timiraos (@NickTimiraos) February 7, 2023
“The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy,” Powell said. “But it has a long way to go. These are the very early stages.”
He believes inflation will approach the Fed’s 2% benchmark in 2024, far below the 6.5% annual inflation recorded by the Bureau of Labor Statistics (BLS) in December 2022. (RELATED: Legendary Financial Expert Michael Burry Sends Cryptic One-Word Tweet, Deletes Entire History Again)
“We expect 2023 to be a year of significant declines in inflation. It’s actually our job to make sure that that’s the case,” Powell said. “My guess is it will take certainly into not just this year, but next year to get down close to 2%.”
The Federal Reserve raised U.S. interest rates on Feb 1. to a 4.5-4.75% range, the highest level in 15 years. To keep inflation on the decline, the Fed anticipated it will continue raising rates up to its 5% target, the central bank said in a press release.
Fed officials are considering a pause on interest rate hikes if inflation continues to drop, Bloomberg reported. Powell indicated the Fed will react to economic data when deciding on future rate increases.
“The reality is we’re going to react to the data,” Powell said. “So if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have [to] do more and raise rates more than is priced in.”
Unemployment levels dropped to 3.4% and the economy added 517,000 jobs in January 2023, according to the BLS. It marks the lowest unemployment rate since May 1969 and greatly surpassed expectations.