Powell: "Disinflation Has Begun... Housing and Services Are Still Lagging"

[Asia Economy New York=Special Correspondent Joselgina] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), stated on the 7th (local time) that "disinflation has begun," but added, "In the services sector, (the trend of easing inflation) is not yet visible. That is why we are raising interest rates in a tightening manner."

At an event hosted by the Economic Club of Washington DC on the same day, Chairman Powell said, "As mentioned at the last Federal Open Market Committee (FOMC), we are at the early stage of inflation easing," and "Disinflation started in the goods sector, which accounts for about one-quarter of our economy." However, he noted, "Inflation is not easing in the housing market. The same applies to services." He added, "This process will take time."

Regarding the January employment report released after the February FOMC, where he diagnosed disinflation, Powell said, "It was much stronger than we expected," and "It still shows that it will take considerable time for (inflation easing) to occur." He also mentioned, "It is good that inflation is decreasing without harming the labor market."

On market expectations about the possibility of interest rate cuts within the year, he said, "If the data is not good, we will raise rates higher than we predicted." Regarding claims to raise the inflation target of 2%, he dismissed them by saying, "2% is the global standard," and "We have no plans to change it."

Chairman Powell predicted that 2023 would be a year when inflation significantly eases. When asked whether the unemployment rate would rise during this process and if there is an unemployment rate criterion that could affect changes in monetary policy, he drew a clear line by saying, "Our goal is to lower inflation, not the labor market."