Federal Reserve Chair Jay Powell said Friday future decisions on interest rate moves will be made on a "meeting by meeting" basis after an aggressive campaign that has pushed rates to the highest level in 16 years.
Powell also said interest rates may not need to rise as high as previously expected with the bank crisis tightening credit conditions, even with inflation well above the Fed's 2% target.
"We've come a long way in policy tightening and the stance of policy is restrictive," Powell said at a conference alongside former Fed Chair Ben Bernanke at the Federal Reserve in Washington Friday.
The Fed's 0.25% interest rate increase on May 3 marked the 10th-straight meeting the central bank raised rates.
"We'll be monitoring as we assess the extent to which additional policy firming may be appropriate to return inflation to 2% over time," Powell said. "That assessment will be an ongoing one. As we move ahead meeting by meeting having come this far, we can afford to look at the data and the evolving outlook and make careful assessments."
Reading at times from prepared notes, Powell said interest rates — which currently stand in a range of 5%-5.25% — are now "restrictive," meaning they are above the level at which economic growth would neither be encouraged nor discouraged in the view of policymakers.
"[Banking sector developments] are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring and inflation," Powell said.
"So as a result, our policy rate may not need to rise as much as it would have otherwise to achieve our goals. Of course, the extent of that is highly uncertain."
These comments largely echoed those made by the Fed chair during a press conference earlier this month.
Stocks were little-changed as Powell spoke, instead reacting negatively to headlines out of the debt ceiling negotiations which crossed the wires at roughly the same time.
Elsewhere on Friday, Powell said he thinks slack in the job market slack is likely to be an important factor in inflation going forward. Powell also noted that inflation in non-housing services has shown signs of being "persistent."
The latest Consumer Price Index released on May 10 showed headline prices rose 5% over the prior year on a headline basis and 5.5% on a "core" basis, which strips out the cost of food and gas. An 8.1% increase in the cost of shelter accounted for 60% of the total increase in core inflation last month.
Core PCE, the Fed’s preferred measure of inflation, rose 4.6% over last year in March. The latest PCE data will be released next week.
After raising rates earlier this month, the Fed's benchmark interest rate stands at the top of what officials' forecasts in March suggests would be the peak for rates during this cycle.
On Thursday, at least two Fed officials suggested that rates may need to rise further to push inflation lower.
Powell left the door open to those moves on Friday. The Fed will release a new set of economic forecasts, including interest rate projections, at the conclusion of its next meeting on June 14.
Powell noted Friday, however, investors should not take these forecasts as a "plan" for the central bank.
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