He noted that the unwinding of pandemic-related distortions would continue to exert downward pressure on inflation, but the restrictive monetary policy would increasingly become important in achieving the 2 per cent inflation target. For example, the motor vehicle sector saw a decline in inflation as supply improved and higher interest rates impacted demand.Ĭhair Powell emphasized that while the decline in inflation was a positive development, the Federal Reserve would continue to play a pivotal role in the process. While the recent lower readings were encouraging, Powell cautioned that these data points were only the beginning of the effort to achieve sustained progress in lowering inflation.Ĭore goods inflation had fallen, especially for durable goods, due to tighter monetary policy and supply and demand corrections. However, Powell stressed that food and energy prices, influenced by global factors, could be volatile and not fully indicative of future inflation trends.Ĭore PCE inflation, which had peaked at 5.4 per cent in February 2022, gradually declined to 4.3 per cent in July 2023. Headline PCE inflation, experienced directly by households and businesses, had reached 7 per cent in June 2022 but had decreased to 3.3 per cent by July 2023. Home sales have fallen as a result of mortgage rates rising beyond 7 per cent to their highest levels in two decades.Īlso Read: Moscow demands bigger discounts from foreign firms exiting RussiaĬhair Powell discussed two key inflation metrics, headline Personal Consumption Expenditures (PCE) inflation and core PCE inflation, which excludes food and energy prices. Consumer inflation is currently 3.2 per cent, down from its peak of 9.1 per cent last year.
The key interest rate has been increased to a 22-year high by policymakers in an effort to limit growth and lower inflation to their 2 per cent objective.
However, he emphasized that even though inflation had started to come down from its peak, it remained too high. He noted that the Federal Reserve had already raised policy rates significantly over the past year, with the expectation that these moves would help slow the growth of aggregate demand, giving supply time to catch up.
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