Jerome Powell is going to raise interest rates 2 more times this year

Federal Reserve Chairman Jerome Powell said there was still a risk of doing too little to bring down inflation, noting that he would not back down from raising interest rates in two consecutive policy meetings.

Asked during a panel discussion at the European Central Banks Forum on Central Banks whether the Fed would raise rates every other meeting, Powell said: “ We haven't decided to go for it yet. It might turn out like this. It might not work that way. But I wouldn't, you know, refuse to postpone a rate hike in a row at all."

When asked if he thought the risk was still too low, Powell replied, "Yes."

Powell's new rate hike comments come two weeks after the central bank decided to delay rate hikes at its last policy meeting in June, while signal rates could still rise to 5.6%, meaning that Two additional rate hikes are likely this year.

Powell reiterated Wednesday at a forum of central banks in Sintra, Portugal, that most policymakers are expecting two more raises, which he also did last week before Congress.

The Fed chairman also highlighted the central bank's latest inflation outlook, saying he does not expect inflation, barring volatile food and energy prices, to return to 2% this year or next.

“If you look at the data for the last quarter, you will see stronger-than-expected growth, a tighter-than-expected labor market and higher-than-expected inflation,” Powell said. "So this tells us that while the policy is tough, it may not be tough enough, and it hasn't been tough for long enough."

Powell says the labor market is really pulling up the economy, with large wage increases driving spending and demand.

Powell noted that he does not consider government spending to be the main driver of inflation. President Biden's infrastructure bill increases construction spending, he said, but budget spending that helped Americans weather the pandemic has dwindled.

Powell said he thinks there is a "significant chance" that there will be a recession, though he says he doesn't see that as the most likely case.

Not so easy at the Fed

Powell said the Fed would "restrict" for as long as the central bank needed. But if inflation comes down sharply and officials are confident that inflation is on its way to 2%, “you would start thinking about loosening policy [then],” he said.

“But we are far from that. It's not what we think."

The Fed decided not to raise rates at its last policy meeting in June, Powell said, because officials are still trying to assess whether there are further implications from bank failures earlier this spring.

When a bank fails, there may be a delay in the availability of credit, he said, and the Fed is watching closely to ensure that there is no further restriction on access to credit in addition to the Fed's rate hikes.

“We are intentionally tightening financial terms,” Powell said. “The question is, is there another channel for this or more of what happened in March? We don't really see any evidence of this, but I certainly think about whether we see it."