The Zhitong Finance App learned that Federal Reserve Chairman Powell said that before waiting for more evidence that high interest rates are curbing inflation, the central bank needs to be patient and emphasized the need to keep borrowing costs at a high level.

Powell reiterated that compared to previous expectations, it may take longer to gain the confidence needed to lower interest rates. He shared the same opinion in his remarks after the Federal Reserve interest rate meeting on May 1. He described current interest rates as restrictive in “many, many ways,” but he pointed out that time will tell us whether current policies are strict enough to bring inflation back to the Fed's 2% target.

Powell said, “We are considering the impact of the measures we have taken on the broader financial situation and economy. All of this makes us believe that the current policy is restrictive, and it looks like it will take us a little longer to have confidence in reducing inflation to 2%.” He added: “We think this might just be an issue and we need to maintain this position for a longer period of time.”

In discussions between Powell and European Central Bank Governing Council member Klaas Knot, the Federal Reserve Chairman reiterated that the Federal Reserve may not raise interest rates in the next step. Powell also said that the Federal Reserve is more likely to keep policy interest rates unchanged.

Federal Reserve officials expressed disappointment over the slow progress of inflation in the first quarter. Earlier this month, policymakers kept their benchmark policy interest rate at its highest level in 23 years, and Powell said he was prepared to maintain this level “in due course.”

Powell said he expected inflation to fall on a monthly basis, but the price data for the first quarter weakened his confidence.

He said, “It is noteworthy that the US made no significant progress in further curbing inflation in the first quarter. We didn't expect this to be a smooth path, but these are all higher than we anticipated. It tells us that we need to be patient and let restrictive policies work.”

The Producer Price Index (PPI), a measure of wholesale prices, surpassed all economists' forecasts in April, a government report showed on Tuesday. Several components of the report were used to calculate the Federal Reserve's preferred measure of inflation — the Personal Consumer Spending Price Index — with more mixed results.

Powell described Tuesday's report as “mixed.” Consumer Price Index (CPI) data for April will be released on Wednesday. Economists surveyed by Bloomberg expect prices to rise 3.4% compared to the same period last year.

Despite the Federal Reserve's insistence on higher long-term interest rates, the US economy continues to show resilience. So far this year, the average number of people employed in non-farm payrolls is 246,000 per month, and the unemployment rate remains low. However, the April employment report showed some mild signs, with employment growth slowing and unemployment rising unexpectedly.

Powell described the labor market as “very strong,” showing signs of gradual cooling and rebalancing, partly due to increased labor supply and slowing demand due to immigration. He added that the labor market is about the same level of tension as it was before the COVID-19 pandemic in 2019.