Jerome Powell, the chair of the Federal Reserve, said that despite signs that inflation in the United States is beginning to decline, the path forward is likely to be lengthy and rocky.
"This process is likely to take quite a bit of time. It's not going to be ... smooth, it's probably going to be bumpy," he said.
After a series of rather large increases to the benchmark lending rate, the U.S. Federal Reserve Bank has decided to tone down its aggressive campaign in recent months in an effort to stem the rising tide of inflation.
Its decisions occurred during a time when disinflation was taking place, primarily in the goods sector; nevertheless, the most recent data released by the government on Friday showed that the labor market is continuing to be hotter than policymakers would like, adding stress to the fight against inflation.
"If the data were to continue to come in stronger than we expect, and we were to conclude that we needed to raise rates more ... then we would certainly do that," said Powell at an event in Washington on Tuesday.
He went on to say that there is still a "has a long way to go" in the process of bringing down inflation.
He mentioned that there has not been much of a deflationary trend in the services sector yet, with the exception of the home services category.
He forecasts that there will be "significant declines in inflation" in the year 2023, but he believes that the rate of inflation will only fall down to within striking distance of the 2% target level in the following year.
Even though the Federal Reserve has increased interest rates eight times in the past year, the unemployment rate has remained at historically low levels. This is despite the fact that the central bank has raised rates for the past year in a row on eight separate occasions.
"The labor market's extraordinarily strong," Powell said, adding that it was positive that inflation was coming down but that it should not come at the cost of a strong jobs market.
However, the employment numbers came in stronger than expected, which is another evidence that this process will take "a significant period of time"
Powell told reporters at the end of a two-day policy meeting the previous week that the Fed need "substantially more evidence" to be convinced that inflation is on a persistent downward trend.
