Fed Chair Powell makes interest rate statement that will also affect Turkey

US Federal Reserve (Fed) Chair Jerome Powell, in his speech at the Washington Forum on the Canadian Economy, recalled that the US economy's performance last year was "quite strong."

Stating that they achieved growth of over 3 percent last year due to increasing supply supporting strong growth, spending, and employment, as well as a significant decline in inflation, Powell said, "Recent data shows solid growth and continued strength in the labor market, but at the same time, it shows that no further progress has been made this year toward our 2 percent inflation target."

Powell pointed out that the labor market is moving toward a better balance, stating that surveys of workers and businesses show that the labor market is normalizing.

Noting that the core personal consumption expenditures index, one of the key data points the Fed examines, changed very little in March on an annual basis from 2.8 percent in February according to estimates, Powell noted that three- and six-month inflation measures are above this level.

"WE NEED MORE CONFIDENCE"

Reiterating that they need more confidence that inflation will move sustainably toward 2 percent before easing monetary policy, Powell reminded that they are seeking more confidence to avoid overreacting to the low inflation data obtained in the second half of last year.

"Recent data have clearly not given us greater confidence; instead, they indicate that it is likely to take longer than expected to achieve that confidence," Powell said, adding that, nevertheless, monetary policy is well-positioned to deal with the risks they face.

Pointing out that if high inflation persists, they can maintain the current level of restriction for as long as necessary, Powell emphasized that given the strength of the labor market and the progress made on inflation so far, it would be appropriate to allow restrictive policy to continue and let the data guide them.

Stating that the current situation in inflation is not caused by overheating demand, Powell recalled that the supply side recovered in 2023.

"WE ARE LOOKING FOR EVIDENCE"

Bank of Canada Governor Tiff Macklem also said that inflationary pressures continue to ease, so they continue to move in the right direction.

Stating that growth, which began to recover in the first quarter of the year in the country, looks quite strong, Macklem explained that they expect growth to continue throughout the year.

Pointing out that they have received quite good results in the last few inflation data, Macklem said, "There is some downward momentum in inflation. And I think that reflects the fact that the economy has excess supply and is easing price pressures. We are certainly looking for evidence that this will be sustained. That is what we are looking for right now."