Federal Reserve Chair Jerome Powell warned reporters Wednesday not to dismiss recent high inflation data when looking at how the economy is running.
The remarks from Powell follow a Fed decision not to change the federal funds rate, which remains in a range of 5.25% and 5.50%, the highest in 23 years, which has been placed that high to combat persistent inflation. The consumer price index, which measures inflation, has come in above economists expectations for both January and February, at 3.1% and 3.2%, respectively, adding to fears that inflation is not trending toward the Fed’s target of 2%. (RELATED: Credit Applications Surge As Americans Scramble For Cash To Make Ends Meet)
Powell warned not to dismiss data that is not convenient to the narrative that inflation is decelerating during a Federal Open Market Committee (FOMC) press conference in response to an inquiry from The Wall Street Journal.
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“How much of that inflation that we have seen so far this year do you chalk up to one-off calendar adjustment effects following a period of high inflation versus some change in the trend we saw in the second half of last year?,” WSJ reporter Nick Timiraos asked Powell.
“I always try to be careful about dismissing data that we don’t like, so you need to check yourself on that, and I’ll do that,” Powell responded. “But I would say the January number was very high; the January CPI and PCE numbers were quite high. There’s reason to think that there could be seasonal effects there, but nonetheless, we don’t want to be completely dismissive of it.”
Despite high inflation readings at the start of the year, a median of Fed governors still predicts that rates will be cut to 4.6% by the end of the year.
“The February number was high, higher than expectations, but we have it currently well below thirty basis points core PCE, which is not terribly high, so it’s not like the January number, but I take the two of them together and I think they haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward 2%,” Powell continued. “I don’t think that story has changed. I also don’t think that those readings added to anyone’s confidence that they were moving closer to that point.”
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