Federal Reserve Chairman Jerome Powell on Wednesday ruled out a 0.75% move higher in interest rates in the immediate future.
The central bank chief’s commentary took steam out of market speculation that the Fed would further ratchet up its pace of tightening.
The commentary coincides with the Fed’s decision to raise short-term interest rates by 0.50%. The Fed has not increased interest rates in increments larger than 0.25% since May 2000.
Powell said further 0.50% moves “should be on the table at the next couple of meetings” (in June and July). But he clarified that the Fed was not considering moves any larger than that at the moment.
“A 75-basis-point increase is not something the committee is actively considering,” Powell said.
Although most Fed watchers had expected the central bank to move by 0.50% this week, markets had begun pricing in the odds of 0.75% moves in future meetings.
Last month, St. Louis Fed President James Bullard said the Fed shouldn’t rule out a 0.75% move — although he did not see the case for one at the moment. Bullard, a voting member of the policy-setting Federal Open Market Committee, supported the 0.50% interest rate bump on Wednesday.
The central bank is in the midst of an effort to withdraw its COVID-era easy money policies in the face of inflation rates unseen since the early 1980s when the Fed under Paul Volcker dramatically tightened Fed policy to tamp down runaway price increases.
Powell said he has “tremendous” respect for the late Fed chair. He responded to a question from Yahoo Finance by noting, though, that higher interest rates will come with slower economic activity.
“There may be some pain associated with getting back to that, but the big pain is in not dealing with inflation and allowing it to become entrenched,” Powell said.
The Fed’s next meeting will take place June 14 and 15.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.