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WASHINGTON, June 21 (Reuters) - The Federal Reserve's fight to lower inflation back to its 2% target "has a long way to go," Federal Reserve Chair Jerome Powell said on Wednesday in testimony prepared for delivery to the House Financial Services Committee. "Inflation has moderated somewhat since the middle of last year," with the Fed's preferred measure of inflation falling substantially from a peak around 7% last year to 4.4% as of April. Investors broadly expect increases to resume at the Fed's July meeting, though financial market indicators reflect doubts that the Fed will deliver more increases beyond that meeting. "We have been seeing the effects of our policy tightening on demand in the most interest-rate–sensitive sectors of the economy" such as housing, Powell said. Stress in the banking sector is also creating "headwinds" for households and businesses, the effect of which remains uncertain, Powell said.

Persons: Jerome Powell, Powell, Howard Schneider, Andrea Ricci Organizations: Financial Services Committee, Fed, Federal, Thomson

Inflation has "started to abate" but the Fed will remain focused on returning it to the 2% target, Fed governor and vice chair nominee Philip Jefferson said in testimony prepared for his confirmation hearing on Wednesday before the Senate Banking Committee. "The economy faces multiple challenges, including inflation, banking-sector stress, and geopolitical instability. "Inflation has started to abate, and I remain focused on returning it to our 2% target." As a group, Fed policymakers last week signaled two more interest-rate hikes are likely by the end of the year. The Senate Banking committee on Tuesday also released prepared remarks from Fed Board nominee Adriana Kugler, who said returning inflation to the central bank's 2% target is key to setting a strong foundation for the U.S. economy.

Persons: Philip Jefferson, Jefferson, Lisa Cook, ” Cook, Cook, Adriana Kugler, " Kugler, Kugler, Bob Menendez, Menendez, Howard Schneider, Michael S, Dan Burns, Ann Saphir, Matthew Lewis Organizations: Reserve, Committee, Federal, World Bank, Fed, of Governors, Senate, Derby, Thomson Locations: Washington, U.S, New York, Berkeley , California

[1/3] The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, D.C., U.S., June 14, 2022. "Core inflation is not coming down like I thought it would," Federal Reserve Gov. The U.S. economy was "still ripping along for the most part," he said, with the underlying pace of price increases "moving sideways." The Fed this week ended its run of 10 consecutive rate hikes when policymakers decided to keep the benchmark overnight interest rate in a range of from 5% to 5.25%. Though Fed chair Jerome Powell at a press conference Wednesday said no decision had been made about the upcoming July Fed meeting, investors and other analysts broadly expect the Fed to resume rate increases.

Persons: Sarah Silbiger WASHINGTON, Christopher Waller, Waller, Thomas Barkin, Barkin, I’m, Jerome Powell, Austan Goolsbee, Goolsbee, Howard Schneider, Chizu Nomiyama, Alistair Bell Organizations: Eccles Federal Reserve, Washington , D.C, REUTERS, . Federal Reserve, Federal, Silicon Valley Bank, Richmond Federal, Fed, Chicago Fed, Thomson Locations: Washington ,, Norway, Silicon, U.S, Maryland

"Financial stresses in the banking sector are a factor that my colleagues and I are closely watching as we determine the appropriate stance of monetary policy going forward," Waller said. But "it is still not clear that recent strains in thebanking sector materially intensified the tightening of lending conditions," beyond what the Fed was trying to do anyway through its interest rate policy, Waller said. His remarks are the first by a Fed official since policymakers this week held the U.S. interest rate steady. That notion was partly behind the Fed's decision this week to delay further rate increases for at least a single meeting, to take stock of how the financial system and the economy overall are faring. However the Fed is now broadly expected to approve another quarter point rate increase when officials meet on July 25-26.

Persons: Christopher Waller, Waller, Howard Schneider, Chizu Organizations: Silicon Valley Bank, Federal Reserve, Fed, Thomson Locations: Silicon, Norway

WASHINGTON, June 16 (Reuters) - Richmond Federal Reserve president Thomas Barkin said Friday he is comfortable with further interest rate increases if coming data does not show that weakening demand for goods and services is feeding through to slower inflation. "I am still looking to be convinced of the plausible story that slowing demand returns inflation relatively quickly" to the 2% target, Barkin said in comments prepared for delivery to the Maryland Government Finance Officer Association. Many investors now expect the central bank to resume rate increases at its meeting in July. But he did say the focus remained on returning "stubbornly persistent" inflation to the Fed's 2% target, from a current level more than twice that. "The ’70s provides a clear lesson: If you back off inflation too soon, inflation comes back stronger, requiring the Fed to do even more, with even more damage," Barkin said.

Persons: Thomas Barkin, Barkin, I’m, Howard Schneider, Chizu Organizations: Richmond Federal, Maryland Government, Association, Thomson Locations: U.S

[1/3] The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, D.C., U.S., June 14, 2022. REUTERS/Sarah SilbigerWASHINGTON, June 16 (Reuters) - U.S. Federal Reserve officials struck a hawkish tone in their first comments since the central bank held the policy interest rate steady at its meeting this week but signaled that rate hikes will likely resume. "Core inflation is not coming down like I thought it would," Federal Reserve Gov. The U.S. economy was "still ripping along for the most part," he said, with the underlying pace of price increases "moving sideways." Though Fed chair Jerome Powell at a press conference Wednesday said no decision had been made about the upcoming July Fed meeting, investors and other analysts broadly expect the Fed to resume rate increases.

Persons: Sarah Silbiger WASHINGTON, Christopher Waller, Waller, Thomas Barkin, Barkin, I’m, Jerome Powell, Howard Schneider, Chizu Organizations: Eccles Federal Reserve, Washington , D.C, REUTERS, . Federal Reserve, Federal, Silicon Valley Bank, Richmond Federal, Fed, Thomson Locations: Washington ,, Norway, Silicon, U.S, Maryland

But coupled with the anticipated path of inflation, those projections actually indicate monetary policy will grow more restrictive through 2024 on a "real" or inflation-adjusted basis. It's a nuance undergirding why the Fed sees inflation continuing to fall through next year and unemployment rise despite expected lower interest rates. And in fact, that seems to be what many on the Fed intend: A real policy rate of interest that gradually tightens next year even as the "nominal" rate printed in its policy statement declines. Reuters Graphics Reuters GraphicsREAL VS NOMINALUnder the median projections provided this week, monetary policy actually grows slightly more restrictive next year. By the end of 2024 that spread actually widens to 2%, as the interest rate declines but the rate of inflation falls more sharply.

Persons: Jerome Powell nodded, We're, Howard Schneider, Dan Burns, Andrea Ricci Organizations: . Federal, U.S, Reuters Graphics Reuters, Silicon Valley Bank, Thomson Locations: Silicon

More rate increases were coming, she said. LAST MILEThe Fed's pause was partly out of respect for the time lag between rate increases and their impact on the economy. The ECB needs to see the effects of policy go "all the way down to inflation," Lagarde said. "I still think, and my colleagues agree, that the risks to inflation are to the upside," Powell said. "What we'd like to see is credible evidence that inflation is topping out and then beginning to come down."

Persons: Dado Ruvic, Christine Lagarde, Lagarde, Jerome Powell, Powell, Howard Schneider, Dan Burns, Paul Simao Organizations: REUTERS, WASHINGTON, European Central Bank, ECB, U.S . Federal Reserve, The Bank of England, Reserve Bank of Australia, Bank of Canada, Bank of Japan, Reuters, Fed, Reuters Graphics, Thomson Locations: FRANKFURT, New U.S, U.S, Europe

It was a subtly optimistic message that tempered otherwise hawkish projections that see the policy rate rising higher than market participants anticipated. In fact, investors in contracts tied to the Fed's policy rate see the central bank delivering only one quarter-percentage-point increase by the end of the year. They see about a 65% chance of a rate hike next month, up only slightly from before this week's meeting. A dovish decision, a hawkish statement, and very hawkish dots," wrote economists at the analytics firm of Larry Meyer, a former Fed governor. Fed officials at the median more than doubled their outlook for 2023 economic growth to 1%, from 0.4% in the March projections.

Persons: Fed's Powell, Jerome Powell, Powell, Subadra Rajappa, Larry Meyer, Howard Schneider, Bansari Mayur, Chizu Nomiyama, Paul Simao Organizations: Federal Reserve, Societe Generale, Fed, Market, Nasdaq, Dow Jones, Wednesday, Thomson Locations: WASHINGTON, U.S

It means that the increases in prices will happen, so there will be inflation but that the process of inflation will stop." BARGAININGAt the Fed's annual Jackson Hole conference in Wyoming, Powell laid out systematically what he'd be watching to see if inflation was becoming more persistent. History also teaches, however, that central banks cannot take for granted that inflation due to transitory factors will fade." The Fed kicked its rate increases into overdrive and Powell explained with this June 15, 2022 comment: "Contrary to expectations, inflation again surprised to the upside. Some indicators of inflation expectations have risen, and (inflation) projections this year have moved up notably.

Persons: Jerome Powell's, Don Lee, Powell, We're, we're, Howard Schneider, Paul Simao Organizations: Federal Reserve, Reuters Graphics Reuters, Los Angeles Times, Jackson, Fed, Thomson Locations: U.S, Wyoming

Further rate increases would "take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," it said. The new projections, adding a hawkish tilt to Wednesday's interest rate decision, show policymakers at the median see the benchmark overnight interest rate rising from the current 5.00%-5.25% range to a 5.50%-5.75% range by the end of the year. Half of the 18 Fed officials penciled in their "dot" at that level, with three seeing the policy rate moving even higher - including one official who sees it rising above 6%. Two Fed officials see rates staying where they are, and four see a single additional quarter-percentage-point increase as likely appropriate. Reporting by Howard Schneider; Additional reporting by Bansari Mayur Kamdar; Editing by Paul SimaoOur Standards: The Thomson Reuters Trust Principles.

Persons: Sam Stovall, Howard Schneider, Bansari Mayur, Paul Simao Organizations: Federal Reserve, Market, SFRA Research, Thomson Locations: WASHINGTON, U.S

The Fed is scheduled to release its policy statement and new quarterly economic projections at 2 p.m. EDT (1800 GMT). POLICY COMPROMISEData since the last Fed meeting in early May has left policymakers with a tough set of signals to read, and ample room for debate. The decision won't mean rate hikes are in for an extended pause, or - a point Powell is likely to emphasize - that rate cuts are anticipated anytime soon. The Fed's last set of quarterly projections anticipated the benchmark overnight interest rate would only move down by the end of 2024 as inflation also declined - movements that keep the inflation-adjusted rate of interest roughly the same. A true "pivot" towards looser policy was only seen occurring in 2025, when the policy rate was projected by year's end to decline more than inflation.

Persons: Blerina Uruci, Rowe Price, Jerome Powell, Powell, Howard Schneider, Paul Simao Organizations: Federal, Reuters Graphics Reuters, Rowe Price Associates, Fed, Thomson Locations: U.S

But while the Fed in 2019 was asking "'is this as strong as the labor market can get?' Fed rate hikes could have "very significant, uneven short-term impacts" on the job market. So far headline payroll employment growth remains strong. Reuters Graphics Reuters GraphicsWANTING IT BOTH WAYSFor now, though, the Fed might mark the pandemic labor rebound as essentially complete, despite the risks. The economy needs to create about 100,000 payroll jobs a month to keep pace with population growth.

Persons: Bryan Woolston, Michael Madowitz, Raphael Bostic, Trump, Howard Schneider, Dan Burns, Andrea Ricci Organizations: Kentucky, Center, REUTERS, . Federal Reserve, Washington Center for Equitable, Reuters Graphics Reuters, Bureau of Labor Statistics, Atlanta Fed, BLS, American Progress, White House Council, Economic Advisers, Thomson Locations: Frankfort , Kentucky, U.S, Bryan Woolston WASHINGTON, COVID

The Bank of England in February removed its explicit guidance and tied decisions to inflation data. The Bank of Japan, by contrast, still battling to raise perennially weak inflation, has left the core part of its guidance intact with a pledge to "patiently" sustain loose policies. The European Central Bank says it has adopted a "meeting-by-meeting" approach with "a strong preference against returning to outright forward guidance on policy rates." If the projections show the policy rate moving up later this year, officials will likely face questions if they do as expected and hold rates steady at the June meeting. If the rate is not seen moving up, they will face questions about not being responsive to recent data showing strong inflation despite pledging to be "data dependent."

Persons: Jerome Powell, BOE, Andrew Bailey, Powell, Ben Bernanke, Bernanke, Gregory Daco, Louis, James Bullard, Data's, Howard Schneider, Dan Burns, Andrea Ricci Organizations: Reserve Bank of Australia, Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Louis Fed, Reuters, Thomson Locations: Central

The number of unemployed people jumped by 440,000, the most since November 2010. Reuters Graphics Reuters GraphicsYet the rise in Black unemployment in particular is something critics of Fed policy have been concerned could be a leading-edge sign that the job market was turning sour. Fast initial job losses among Black workers are a feature of U.S. downturns and recessions. Reuters GraphicsDespite the outsized job gains, the details of the report may suggest a labor market "normalizing" after the disruptions of the pandemic. "The fact is that the labor market is still very tight, aided by shortfalls in some service sectors, as well as by historic demographic trends" like population aging, Rieder said.

Persons: Biden, Nick Bunker, Rick Rieder, Rieder, Howard Schneider, Paul Simao Organizations: U.S, Reuters Graphics Reuters, Bureau of Labor Statistics, Reuters, BlackRock, Thomson

Since the release of their last economic projections in March, the unemployment rate has fallen and inflation has largely moved sideways. She expects the Fed to keep its policy rate steady this month "while hinting at potential further hikes," a way to compromise among different views and keep pressure on financial conditions. Fed Chair Jerome Powell and others insist that sort of erratic path is not their base case. The intent, rather, is to reach a "sufficiently restrictive" policy rate and remain at that level until it is clear inflation is falling towards the Fed's 2% target. "I do think they are done" with rate increases, he said, but "I cannot rule out another hike in June."

Persons: they've, Tiffany Wilding, PIMCO, Jerome Powell, Philip Jefferson, Larry Meyer, Ian Shepherdson, Howard Schneider, Paul Simao Organizations: Federal Reserve, Market Committee, Reuters Graphics Reuters, North, Fed, Consumer, Reuters, Reuters Graphics, Labor Department, Pantheon, Thomson Locations: U.S, North American, Washington

The rate hike "skip" has now become jargon for an emerging compromise between concerns inflation is not yet controlled with fears the economy may slow sharply as banks pull back on credit. "I don't really see a compelling reason to pause," Cleveland Fed president Loretta Mester said in an interview published Wednesday in the Financial Times. Jefferson acknowledged inflation remains "too high" and that "by some measures progress has been decelerating recently." While Jefferson does not expect a recession, he noted that there are reasons to be careful after 15 months in which the policy rate was raised by 5 percentage points. Reporting by Howard Schneider; Editing by Paul Simao, Nick Zieminski and Daniel WallisOur Standards: The Thomson Reuters Trust Principles.

Persons: Philip Jefferson, Jefferson, Jerome, Powell, Krishna Guha, Patrick Harker, Harker, Loretta Mester, Michelle Bowman, Howard Schneider, Paul Simao, Nick Zieminski, Daniel Wallis Organizations: Federal Reserve, Fed, U.S . Senate, Philadelphia Fed, Cleveland Fed, Financial Times, Thomson Locations: U.S, Washington

Meanwhile districts reported that the pace of inflation had slowed, with prices rising "moderately" and contacts in most parts of the country expecting a similar pace of price increases in the coming months. But many Fed policymakers since then have signaled they may rather wait before undertaking any further policy tightening. Fed policymakers have said credit conditions are a key input to their calculations for monetary policy-setting. About half of districts reported no change in economic activity in recent weeks, the report showed, while four reported small increases and two reported "slight to moderate declines." At the St. Louis Fed, banking contacts said loan demand had softened and they expected further weakening ahead.

Persons: Louis, Ann Saphir, Andrea Ricci, Chizu Organizations: Federal, Silicon Valley Bank, Signature Bank, Cleveland Fed, Minneapolis Fed, St, Louis Fed, Thomson Locations: U.S, Silicon

"The risks of doing too much or doing too little are becoming more balanced and our policy adjusted to reflect that," Powell said. Ahead of a June 13-14 policy meeting "we haven't made any decisions about the extent to which additional policy firming will be appropriate." U.S. policymakers remain on the fence about their upcoming rate decision, and Powell's appearance on Friday was a moment that could have provided clarity. But the central bank will still receive important jobs and inflation data in coming weeks that could sway the debate. If an actual U.S. debt default is the result, the central bank may even be pushed towards emergency steps to ease the burden on the economy.

WASHINGTON, May 19 (Reuters) - Wall Street, small businesses and potential homebuyers may all breath a sigh of relief if the Federal Reserve chooses not to raise interest rates at its policy meeting next month, as many traders and analysts expect. If an actual U.S. debt default is the result, the central bank may even be pushed towards emergency steps to ease the burden on the economy. "I would say it was a pause, but a pause could be a 'skip,' or it could be a hold," Bostic said. Data on inflation, jobs, and the banking industry since then have done little to clarify the situation, with nothing seeming to change very fast. Reporting by Howard Schneider; Editing by Dan Burns and Paul SimaoOur Standards: The Thomson Reuters Trust Principles.

Inflation "is still too high, and by some measures progress has been slowing," Jefferson said in comments prepared for delivery to the National Association of Insurance Commissioners. While his baseline forecast does not include recession, he said he expects job growth to slow and the unemployment rate possibly rise over time. Jefferson did not indicate a preference for holding rates steady or proceeding with further rate increases at the Fed's June meeting, when a rate pause is widely expected. He said, however, he would "consider all these factors" in the context of jobs and inflation data still to be released before the June 13-14 meeting. "There is considerable uncertainty about the magnitude of the impact on household spending and business investment, and this uncertainty complicates economic outlook forecasts," Jefferson said.

At the same time, he said the job market is showing an "unprecedented" break from past behavior with a steady drop in job openings without any rise in the unemployment rate. The big unknown is whether that continued job market health is consistent with inflation falling steadily from its current levels above 4% back to the Fed's 2% target. That could allow the job market to cool without as much of a rise in unemployment as might otherwise be the case. Economists and policymakers at this week's conference pointed to other factors adding to the case for a soft landing. But at this point the "uncertainty" about what's at work in the economy could, some officials feel, mask developments that are working in their favor.

Barkin said he remained open-minded on whether the Fed at its June 13-14 policy meeting should raise the benchmark policy rate for an 11th straight time or leave it at the current range between 5.00% and 5.25%. I do wonder whether we're not going to need more impact on demand to bring inflation down to where we need to go," Barkin said, laying out a potential case for further rate increases. Barkin said he is comfortable overall with the Fed's move earlier this month to a meeting-by-meeting, data-dependent approach after having raised the policy rate by 5 percentage points since March 2022 in an effort to lower the highest inflation in 40 years. "I'm still seeing data that suggests a hot job market and enduring inflation," he said. "I continue to believe that inflation will last longer than perhaps market measures of inflation compensation would suggest.

But Fed officials on Monday said the jury is very much out. Bostic said businesses in his southeastern U.S. Fed district "are telling me we think you're close to overdoing it ... Investors have consistently bet that the central bank, due to some combination of recession or a faster-than-expected drop in inflation, will be cutting rates by later this year. Minneapolis Fed President Neel Kashkari said the central bank probably has "more work to do on our end, to try to bring inflation back down." In addition, he says the full impact of Fed rate hikes has yet to be felt.

Reuters Graphics Reuters GraphicsReuters Graphics Reuters GraphicsInvestors and analysts took the Labor Department report on the whole as supporting the prospect that the Fed would pause its rate increases at the June 13-14 meeting. The PCE, which is the Fed's preferred gauge for its 2% inflation target, has been running at more than twice that level. Continued readings like the ones in April could weaken the case for pausing rate hikes. That's how increases in its policy rate influence economic activity. FEDSPEAK: OngoingThe Fed's internal communications rules set a "blackout" period around each policy meeting.

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