Federal Reserve chair Jerome Powell speaks during a news conference, Wednesday, Feb. 1, 2023, at the Federal Reserve Board in Washington. (AP Photo/Jacquelyn Martin)
WASHINGTON (AP) – Federal Reserve Chair Jerome Powell said Tuesday that if the job market further strengthens in the coming months or inflation readings accelerate, the Fed might have to raise its benchmark interest rate higher than it now projects.
Powell’s remarks followed the government’s blockbuster report last week that employers added 517,000 jobs in January, almost double the previous month’s total. The unemployment rate fell to its lowest level in 53 years, 3.4%.
“The reality is if we continue to get strong labor market reports or higher inflation reports, it might be the case that we have to raise rates more” than is now expected,” Powell said in remarks to the Economic Club of Washington.
Though price pressures are easing and Powell said he envisions a “significant” decline in inflation this year, he cautioned that “these are the very early stages of disinflation. It has a long way to go.”
Powell’s remarks Tuesday followed the moderately optimistic note he struck at a news conference last week. Speaking to reporters then, Powell noted that high inflation had begun to ease and said he believed the Fed could tame spiking prices without causing a deep recession involving waves of layoffs.
But the Fed chair warned then that the job market was still out of balance, with robust demand for labor and too-few workers in many industries leading employers to sharply raise wages, a trend that could help keep inflation high.
On Friday, the government issued a jobs report that suggested that the economy and hiring were even healthier than Fed officials had thought. Employers added 517,000 jobs in January, the report said, nearly double December’s gain, and the unemployment rate reached 3.4%, the lowest level in 53 years.
