Fed to move at 'careful pace' in rate hikes to avoid mistake: Chair

ISTANBUL

US Federal Reserve Chair Jerome Powell said Thursday that the central bank would move at a "careful pace" in interest rate increases to avoid a mistake.

"It only makes sense to move at a careful pace," he said during his hearing at the Senate Banking Committee, adding that the Fed is trying "to avoid the mistake of going too far" in raising interest rates.

The central bank last week skipped an interest rate increase at the conclusion of its two-day meeting, while Powell said in his post-meeting press conference that “nearly all” voting members of the Federal Open Market Committee believe there is a need for more rate hikes in 2023 to bring down inflation.

The Fed's latest projections also indicate that two more rate hikes, by 25 basis points each, are possible for the remainder of this year.

While Powell said in his hearing that the labor market is gradually cooling, he added that it is possible to slow down inflation without causing significant job losses.

The unemployment rate in the US surprisingly rose to 3.7% in May from 3.4% in April. However, the Fed's latest projection estimates it to average 4.1% for 2023.

About the recent banking crisis in the US, Powell said the Fed is working with banks "to work our way through this."

The chair said he feels "personally committed to learning the right lessons," adding, "There is a clear need to strengthen both supervision and regulation of banks."

The recent banking crisis in the US saw the sudden collapse of three banks in the world's biggest economy – Silicon Valley Bank and Signature Bank in March, followed by First Republic Bank in May.