Jerome Powell says it may make sense to raise US rates at 'more moderate pace'

Federal Reserve chairman says inflation battle has 'a long way to go'

Federal Reserve Chairman Jerome Powell testifies during a House Financial Services Committee hearing. EPA

The US Federal Reserve expects to continue raising interest rates but to slow down the pace of increases, Jerome Powell told a congressional hearing on Wednesday.

“Given how far we've come, it may make sense to move rates higher but to do so at a more moderate pace,” he told the House Committee on Financial Services.

Mr Powell's comments come a week after the Fed paused interest rate increases following 10 consecutive rises in a little more than a year.

US stocks fell as Mr Powell warned that higher rates would be needed to combat inflation, thwarting bets that the US central bank was nearing the end of its tightening cycle.

He said the rate-setting Federal Open Market Committee considers it “appropriate to raise interest rates somewhat further by the end of the year”.

The Fed has already raised its benchmark lending rate by 5 percentage points since March 2022, from close to zero to a range between 5.0 per cent and 5.25 per cent.

But despite these aggressive moves, inflation remains “well above” the Fed's long-run target of 2 per cent, Mr Powell said on Wednesday.

“The process of getting inflation back down to 2 per cent has a long way to go,” he said.

The Fed also lifted its 2023 gross domestic product growth projections to 1 per cent from 0.4 per cent in March.