Powell Says Fed Needs To Be Patient As Confidence Inflation Is Slowing Dips

(RTTNews) - With inflation coming in hotter-than-expected during the first quarter, Federal Reserve Chair Jerome Powell said the central bank needs to be patient with regard to interest rates.

"The first quarter in the United States was notable for its lack of further progress on inflation," Powell said during remarks at the annual general meeting of the Foreign Bankers' Association in Amsterdam on Tuesday.

"We did not expect this to be a smooth road, but these were higher than I think anybody expected," he continued. "And so, what that has told us is we'll need to be patient and let restrictive policy do its work."

Powell also said his confidence inflation will slow towards the Fed's 2 percent target is "not as high as it was" but reiterated he does not expect the next move to be a rate hike.

"I don't think it's likely, based on the data that we have, that the next move that we make would be a rate hike," he said. "I think it's more likely that we'll be at a place where we hold the policy rate where it is."

Powell and other Fed officials have repeatedly said they need "greater confidence" inflation is slowing before they consider cutting interest rates.

The Fed chief also commented on a Labor Department report showing producer prices in the U.S. climbed by more than expected in the month of April.

While the producer price index rose by 0.5 percent compared to economist estimates for a 0.3 percent increase, Powell said he'd call the data "mixed" rather than "hot" due downward revisions to the March data.

The Labor Department said producer prices edged down by 0.1 percent in March compared to the previously reported 0.2 percent uptick.

The report also said the annual rate of producer price growth accelerated to 2.2 percent in April from a downwardly revised 1.8 percent in March.

Economists expected the year-over-year producer price growth to inch up to 2.2 percent from the 2.1 percent originally reported for the previous month.

The Fed's next monetary policy meeting is scheduled for June 11-12, with the central bank widely expected to leave interest rates unchanged.

Meanwhile, the chances rates will be a quarter point lower by the Fed's September meeting are 81.6 percent, according to CME Group's FedWatch Tool.