(16 May 2025, 12:21)

Economic Buzz: Fed's Powell says higher real interest rates may reflect possibility that inflation trends could be more volatile

Federal Reserve Chair Jerome Powell stated yesterday that higher interest rates adjusted for inflation may reflect the possibility that inflation could be more volatile going forward than in the intercrisis period of the 2010s. Powell noted that the Fed's benchmark policy rate is currently well above zero — currently in the range of 4.25% to 4.5% — in recent decades, the Fed has cut the rate by about 500 basis points when the economy is in a recession. Powell stressed the critical need to maintain inflation expectations at 2%, which has also been a hallmark of past assessments. Powell said that the US may be entering a period of more frequent supply shocks and volatile inflation, warranting more transparent communication practices from the central bank. The comments came in a speech as the Fed kicks off a five-year review of the central bank's monetary policy framework.

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Economic Buzz: Fed's Powell says higher real interest rates may reflect possibility that inflation trends could be more volatile