Fed Chairman says full effects of monetary restraint yet to show

US Federal Reserve Chairman Jerome Powell

US Federal Reserve Chairman Jerome Powell, after the central bank's decision to hold interest rates, said that tighter monetary policy had not made its way through the economy yet.

"We raised the interest rate by 5 percentage points, and continued to reduce our holdings at a rapid pace, and we are yet to feel the full effects of our tightening," he added in a press conference on June 14.

The Federal Reserve announced earlier today that the interest rate will be fixed at the current range of 5% and 5.25% without change, in anticipation of successive hikes over 10 meetings since March 2022.

“We have been seeing the effects of our policy tightening and demand in the most interest-rate-sensitive sectors of the economy, especially housing and investment," Powell said. "It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation."

He stressed the Fed's commitment to reducing the inflation rate to 2%, pointing out that most central bank officials likely expect higher interest rates.

However, he indicated that officials had not made a decision on the July meeting, at the same time defending the decision to fix rates, saying that it is good for the economy to wait.