Aug. 25 (UPI) -- Inflation in the U.S. economy remains too high and lending rates may need to move higher, U.S. Federal Reserve Chair Jerome Powell said in a highly anticipated speech on Friday.
Powell spoke at the Jackson Hole economic symposium in Wyoming, saying policies meant to cool the economy are working, but further efforts may be necessary.
"Although inflation has moved down from its peak -- a welcome development -- it remains too high," he said. "We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective."
The Fed since last year's conference raised its key lending rate to a 22-year high of 5.4%. Inflation, meanwhile, is on the decline. Headline inflation reached 9.1% in June 2022 and has since dropped to 3.2% over the 12-month period ending in July.
That's still higher than the 2% target rate pursued by the Fed.
So far this year, Powell said, the economy has expanded by more than expected and consumer spending is particularly robust.
"Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy," he said.
While spending may be robust, the Federal Reserve Bank of New York said recently that credit card debt was now the largest, single source of consumer debt, increasing by $45 billion during the second quarter to stand at $1.03 trillion.
Lending is prohibitive. In the housing sector, the rate on a 30-year, fixed-term mortgage is above 7%, leading existing home sales to drop 16.6% below year-ago levels. Moody's Investors Service, meanwhile, put U.S. banks on a negative watch list and warned in early August of a "mild" recession."
"While another rate hike in the cycle is still far from certain - I'm still of the view they're done - traders are increasingly accepting that they will likely stay there longer than they've expected at any point in the tightening cycle," said Craig Elam, a London-based market analyst of OANDA.
Elam added, however, that Powell's speech did not deviate much from the previous script. The market reaction was muted, with no major movement in major U.S. stock market indices. Crude oil prices were up around 1% as the opening bell, but the rally has since moderated.