Federal Reserve Chairman Jerome Powell: Inflation is expected to remain higher than anticipated, and monetary policy has entered a "new phase."
Federal Reserve Chairman Jerome Powell stated that inflation will remain higher than expected, with a projected core inflation rate of 2.5% by the end of 2025. He noted that monetary policy has entered a "new phase," and the likelihood of interest rate hikes next year is very low. The Federal Reserve lowered the minimum bid rate for overnight repurchase agreements and adjusted the rates for reverse repurchase agreements. Powell is optimistic about the performance of the U.S. economy, believing that the cooling process of the labor market is smooth. Additionally, Bitcoin's price has surpassed $100,000 for the first time, and Powell compared it to "a virtual version of gold."
According to the Zhitong Finance APP, the Federal Reserve released its latest economic forecast summary on Wednesday, indicating that inflation will be more persistent than previously expected, with the core inflation rate projected to reach 2.5% by the end of 2025, up from the September forecast of 2.1%. This forecast suggests that inflation will remain above the Federal Reserve's 2% target level through 2025.
Federal Reserve Chairman Jerome Powell stated at a press conference that, despite the slower-than-expected progress in bringing inflation down to target levels, the likelihood of interest rate hikes next year is low. When asked if he ruled out the possibility of rate hikes, Powell clearly responded that such a scenario is unlikely to occur.
Powell noted that the Federal Reserve's current monetary policy has entered a "new phase." Although he did not formally name this phase, he indicated that it differs from the previous simple "recalibration." He emphasized that the Federal Reserve has lowered interest rates by one percentage point over the past few months and made adjustments to technical policy tools at this meeting.
Specifically, the Federal Open Market Committee (FOMC) lowered the minimum bid rate for overnight repurchase agreement operations to 4.5% and set the total operation limit at $500 billion. At the same time, the rate for overnight reverse repurchase agreement operations was adjusted to 4.25%, with a daily limit of $160 billion per counterparty.
Regarding the labor market, Powell believes that the current cooling process is relatively smooth, with no signs indicating a need for further slowdown. He pointed out that the labor market is cooling in a way that does not raise concerns, which supports the achievement of inflation targets.
Powell also expressed confidence in the performance of the U.S. economy. He stated, "The U.S. economy is performing exceptionally well, far better than other countries around the world. There are no signs that a recession is more likely to occur than usual."
Notably, Bitcoin's price broke the $100,000 mark for the first time this month, partly due to Powell's recognition of it as an investment category. At the New York Times DealBook Summit, Powell compared Bitcoin to gold, calling it a "virtual version of gold."
Regarding the decision announced on Wednesday to lower the federal funds rate by 25 basis points, Powell stated that this was a "closer decision." He believes that this decision plays a key role in achieving the dual goals of maximum employment and price stability. Powell emphasized that the Federal Reserve needs to find a balance between acting too quickly and too slowly, stating that "acting too slowly could unwarrantedly weaken economic activity, while acting too quickly could undermine the results of inflation control."
The Federal Reserve's next steps will continue to be data-driven and flexible in response to economic changes