WASHINGTON (AP) – Jerome Powell delivered a tough message at the start of a news conference Wednesday: Inflation is way too high, and the Federal Reserve is laser-focused on taming it with higher borrowing costs.
Yet despite his resolute words, the Fed chair also said for the first time that the central bank’s actions are already having an effect on the economy in ways that could slow the worst inflation the nation has endured in four decades.
With the Fed’s benchmark interest rate now at a level that’s believed to neither stimulate nor restrain growth, Powell said the pace of rate hikes could slow in the coming months. And he pointed to signs that many businesses are having an easier time filling jobs, a trend that would limit pay increases and potentially slow inflation.
“There were some hints that we’re closer to the end than the beginning” of the Fed’s efforts to tighten credit, said Michael Feroli, an economist at JPMorgan Chase and a former Fed staffer.
Powell’s suggestion that the Fed could moderate its future rate hikes after it announced a three-quarter-point hike Wednesday – its second in a row of that substantial size – helped touch off a celebratory rally in the stock market, with the S&P 500 jumping 2.6% and the tech-heavy Nasdaq rocketing 4.1%, its biggest gain in more than two years.