With inflation surpassing expectations in the first quarter, Federal Reserve Chair Jerome Powell emphasized the need for patience regarding interest rates.
"The first quarter in the United States was notable for its lack of further progress on inflation," Powell stated during remarks at the annual general meeting of the Foreign Bankers' Association in Amsterdam. "We did not expect this to be a smooth road, but these were higher than I think anybody expected," he added. "As a result, we need to be patient and allow restrictive policy to take effect."
Powell acknowledged that his confidence in inflation slowing towards the Fed's 2 percent target is "not as high as it was," but he reiterated that he does not foresee a rate hike in the near future. "Based on the data that we have, it is unlikely that our next move will be a rate hike," Powell said. "It is more likely that we will maintain the current policy rate."
Powell and other Fed officials have consistently stated that they require "greater confidence" that inflation is decelerating before considering any interest rate cuts.
Additionally, Powell commented on a Labor Department report indicating that producer prices in the U.S. increased more than anticipated in April. Despite the producer price index rising by 0.5 percent, compared to economist estimates of a 0.3 percent increase, Powell described the data as "mixed" rather than "hot," due to downward revisions to the March data.
The Labor Department reported that producer prices decreased by 0.1 percent in March, a revision from the previously reported 0.2 percent uptick. The annual rate of producer price growth accelerated to 2.2 percent in April from a downwardly revised 1.8 percent in March. Economists had forecasted year-over-year producer price growth to increase to 2.2 percent from the originally reported 2.1 percent for the previous month.
The Fed's next monetary policy meeting is set for June 11-12, with widespread expectations that interest rates will remain unchanged. Meanwhile, according to CME Group's FedWatch Tool, there is an 81.6 percent likelihood that rates will be a quarter point lower by the Fed's September meeting.