Inflation message from Fed Chair Powell: Tightening will continue

Federal Reserve (Fed) Chair Jerome Powell stated that they view the inflation data released in the U.S. today as "progress," but that they do not believe they have the confidence to begin easing monetary policy.

Powell held a press conference after the Fed kept its policy rate unchanged within the 5.25-5.50 percent range, the highest level in 23 years, in line with expectations.

Stating that the U.S. economy has made significant progress toward employment and inflation goals over the last two years, Powell said the labor market has reached a better balance with continued strong job gains and a low unemployment rate, and that inflation has declined significantly but remains too high.

'WE ARE MAINTAINING OUR RESTRICTIVE STANCE ON MONETARY POLICY'

Emphasizing their strong commitment to bringing inflation down to the 2 percent target, Powell said, "We are maintaining our restrictive stance on monetary policy in order to keep demand in line with supply and to reduce inflationary pressures."

Noting that inflation has eased significantly over the past two years but remains above the long-term 2 percent target, Powell stated that inflation data from earlier this year was higher than expected, but that recent monthly data has eased somewhat.

Referring to the Consumer Price Index (CPI) data released in the country today, Powell assessed, "We see today's data as progress, but we do not think we have the confidence to begin easing monetary policy yet."

'MODEST PROGRESS HAS BEEN MADE TOWARD OUR INFLATION TARGET'

Reiterating that they do not expect it will be appropriate to lower the policy rate until they have gained greater confidence that inflation is moving sustainably toward 2 percent, Powell expressed that the data so far this year has not given them that greater confidence.

Powell said, "However, the most recent inflation readings have been more favorable than earlier in the year, and there has been modest progress toward our inflation target. We will need to see more good data to bolster our confidence that inflation is moving sustainably toward 2 percent."

Stating that they are prepared to maintain the policy rate at its current level for as long as appropriate if the economy remains strong and inflation persists, Powell noted that they are also prepared to respond if the labor market weakens unexpectedly or if inflation falls faster than expected.

Emphasizing that monetary policy is well-positioned to deal with the risks and uncertainties faced, Powell stated that they will continue to make decisions meeting by meeting, taking into account the totality of the data, the outlook, and the balance of risks.

According to data released by the U.S. Department of Labor today, the Consumer Price Index (CPI) remained unchanged on a monthly basis in May, while it increased by 3.3 percent on an annual basis, coming in below expectations.