Biggest takeaways from Fed Chair Powell's press conference following May rate hike decision

Yahoo Finance Fed reporter Jennifer Schonberger discusses comments made by Federal Reserve Chairman Jerome Powell on how long the Fed plans on continuing to raise interest rates in wake of the ongoing banking crisis.

Video transcript

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- All right, well, the Federal Reserve raising rates by 25 basis points, and Chairman Jerome Powell not committing to a pause, still maintaining that we are far from the Fed's target 2% inflation rate. Our own Jennifer Schonberger was at the press conference. Jennifer, tell us what your takeaway is.

JENNIFER SCHONBERGER: Good afternoon. That's right, Fed Chair Powell leaving the door open for further tightening and saying that the committee is going to take this on a meeting by meeting basis. He said a decision today on a pause was not made. It's unclear to him whether the peak of the current range of 5 to 5 and 1/4 will indeed be the peak for the Fed funds rate here. He says, all in all, they are closer to the end than the beginning, and may already even be there. Take a listen.

JEROME POWELL: 2% real rates. That's meaningfully above what most people would-- many people, anyway-- would assess as the neutral rate. So policy is tight, and you see that in interest-sensitive activities. And you also begin to see it more and more in other activities. And if you put the credit tightening on top of that and the QT that's ongoing, I think you feel like we may not be far off. We're possibly even at that level.

JENNIFER SCHONBERGER: Powell says he still thinks it's going to take a while for inflation to come down and that in this environment, rate cuts would not be appropriate. He pointed to inflation excluding housing and how sticky that's been. He says demand is going to have to weaken in order to bring inflation down further. Now, he said there was very strong support across the board for the 25 basis point rate hike that the central bank took today, and that people talked about pausing, but not so much at this meeting. So perhaps at some point here in the near future.

On the banking system, Fed Chair Powell said the resolution of First Republic Bank really draws-- is an important step towards drawing a line on the severe stress that we've seen in recent weeks. Though he did say in the latest lending conditions that we will see next week that midsized banks have seen some tightening there, and that is the number one thing that the Fed is watching in this. Now, on the debt ceiling, he says that Congress simply must act here and that they should note that the Fed really can't protect the economy here. Guys?

- All right, thanks so much for that update, Jennifer.