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Fed's Powell still unsure on rate cuts as inflation persists

Federal Reserve Chair Jerome Powell spoke Friday morning commenting on the Fed's current economic outlook, stating "it would be premature" to say with certainty that the Fed's work with interest rates is done. "We are prepared to tighten policy further if it becomes appropriate to do so," Powell went on to say.

Yahoo Finance Fed Reporter Jennifer Schonberger joins the Live show to break down Powell's comments and what it means for the central bank going forward.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

AKIKO FUJITA: Well, Federal Reserve Chair Jay Powell speaking right now at Spelman College in Atlanta, Georgia. Our very own Jen Schonberger is following the details there for us. And Jen, we've already heard the Fed Chair pushed back against those expectations that the Fed is done with raising rates.

JENNIFER SCHONBERGER : Good morning, Akiko. That's right. Fed Chair Jay Powell speaking right now at Spelman College in Atlanta, warning markets that it would be premature to conclude that the Fed is finished raising rates or speculate on when rate cuts could begin. He said that while the Fed is encouraged by the decline in inflation. The Fed still needs to see more further progress to feel fully confident that the policy rate is high enough to continue bringing inflation back towards the Fed's 2% target.

He said that while the policy rate is well into restrictive territory that quote, "It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease. We are prepared to tighten policy further if it becomes appropriate to do so."

Now, Powell's comments coming just after the Fed's favored inflation gauge core price consumption expenditures index showed inflation was running at 3 and 1/2% in October down from 3.7% in September. Powell highlighting from that very report that over the past six months ending in October, core inflation ran at an annual rate of 2 and 1/2%, something for the doves. But he cautioned that while that lower reading on inflation is welcome, progress must continue if the Fed is to reach its 2% goal.

Now, Powell also said that he believes the full effects of the Fed's rate hikes have yet to kick in. He reiterated that the outlook for the economy is unusually uncertain. And as a result of that, the Fed will proceed carefully. He said the risks to over or under tightening have become more balanced. So suggesting that the Fed will hold rates steady at the December policy meeting in two weeks time.

Now, he said that he and his colleagues believe that growth and consumer spending will slow over the next year as the effects from the pandemic fade and as the Fed's aggressive rate hikes continue to slow growth. Powell reiterated that decisions will be made on a meeting by meeting basis based on the totality of the data. Akiko.

AKIKO FUJITA: Jen, it's been a very busy week of Fed speak. You've been monitoring all of that. Based on what we're hearing from Fed Chair today and what we heard from Fed officials earlier this week, what does that tell you still about how divided the FOMC is?

JENNIFER SCHONBERGER : Yeah. I think that Fed officials are now in a place where they're feeling more comfortable given the inflation data, but they still need to see further progress that what we saw over the past couple of months is going to continue before they feel fully confident in taking language off the table that rate hikes are no longer needed. And as far as rate cuts, they're saying, well, hold on a second here. We're not even there yet.

Once we answer the question of whether rates are high enough to feel confident that inflation is coming back down to 2%, we are going to hold for a while before we even consider cutting. So once again, the market's getting ahead of the Fed and the Fed Chair sort of trying to pull that back a bit as we saw from New York Fed President John Williams yesterday and other officials this past week.

AKIKO FUJITA: Higher for longer. The consistent message there. Jen Schonberger staying on top of it all for us. Thanks so much.