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Fed’s Powell aims to continue rate hikes amid easing inflation

Yahoo Finance Fed reporter Jennifer Schonberger breaks down comments from Fed Chair Jerome Powell on Tuesday in Washington, D.C.

Video Transcript

DAVE BRIGGS: It's remarkable, the ups and downs because Jerome Powell has been like this since the beginning of the tightening cycle.

SEANA SMITH: The market doesn't care.

DAVE BRIGGS: He does not vary at all. Nonetheless, the markets do. Federal Reserve Chair Jerome Powell spoke at the Economic Club of Washington, DC, giving investors new insight on the central bank's path to monetary tightening. Jen Schonberger has the details for us. Jen, it is fun to watch the markets rise and fall, as Jerome Powell stays relatively level.

JENNIFER SCHONBERGER: Hi, Dave. It can be entertaining. Fed Chair Powell doubling down this afternoon on the Fed's commitment to ongoing rate hikes, suggesting that Friday's strong jobs report would not change the Fed's approach to future rate increases. Speaking at an interview with David Rubenstein at the Economic Club of Washington, DC, Powell said the strong job market shows why it will take a, quote, "significant period of time" to get inflation down, which will require more rate hikes. Take a listen.

JEROME POWELL: We have a significant road ahead to get inflation down to 2%. And I think there's been an expectation that it'll go away quickly and painlessly. And I don't think that's at all guaranteed. That's not the base case. The base case is it-- well, for me, is that it will take some time. And we'll have to do more rate increases. And then we'll have to look around and see whether we've done enough.

JENNIFER SCHONBERGER: Powell called the job market extraordinarily strong, but said he thinks the Fed will make significant progress in lowering inflation this year. Overall, he thinks it will take into next year, though, to get inflation back down closer to 2%. He reiterated disinflation has started in the good sector of the economy. But it will take time to bring inflation in the services side of the economy, excluding housing, down.

Now, Powell said the strength of the job market is structural and due somewhat to the pandemic, which shut off immigration and contributed to a shortage of workers in the US. He thinks that's starting to abate now. And while the job market remains strong, Powell noted that increases in wages are coming down. Now Powell says if we continue to get higher reads on inflation and the job market, then the Fed may have to raise rates higher than what's priced in right now.