Powell: Inflation Fight May Last 'Quite a Bit of Time'

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The Facts

  • Responding to Friday's Labor Dept. report showing an increase in job hiring, US Federal Reserve (Fed) Chairman Jerome Powell said the process of bringing inflation down to the 2% target "is likely to take quite a bit of time," and that, "It’s probably going to be bumpy."

  • Powell's statement came before the Economic Club of Washington, where he declined to say whether the Fed would implement rate hikes higher than the 5-5.25% range forecast in December. However, in the wake of the surprising recent jobs report, he said it was prepared to if continued wage growth led to price jumps.

The Spin

Narrative A

As the January jobs report seemed to surprise Fed officials and investors alike, the Fed's next move should probably be aimed at hiking rates a little bit more. As of December, inflation was still twice the target rate, and unless some drastic increase occurs before the next meeting, raising the benchmark to 5.25% or more will likely be what's needed.

Narrative B

Despite the current official outlook, the US could see Fed rate cuts this year rather than hikes or pauses. Though it didn't show in the January report, all it will take is one month of negative job growth on top of the weakening economy. This is a real possibility given the already —declining economy as well as the recent massive layoffs, particularly in the tech sector.

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