Interest rates hit ceiling, inflation eases: Fed Chair

Policymakers still intend to lower interest rates before the year's end, amid sustained economic growth, said Jerome Powell, Chair of the Federal Reserve.

Speaking at a press conference following a two-day central bank meeting, Powell said, “We believe that our policy rate is likely at its peak for this tightening cycle.”

“If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” he added.

Regarding inflation, he noted that the rise in both the consumer price index (CPI) and personal consumption expenditures (PCE) price index in January and February is another indication of the inflation's nonlinear path downwards.

“I think they haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward 2%”, the Chair highlighted. “We’re not going to overreact to these two months of data, nor are we going to ignore them,” he added.

Powell mentioned that the central bank has not yet come to a decision on how to change the pace of the Fed’s balance sheet reduction, but he indicated that the adjustment is not far off.

“The general sense is that it will be appropriate to slow the pace of runoff fairly soon, consistent with the plans we previously issued," Powell added.

The shape of the Fed's plan to reduce the balance sheet could affect supply in the bond market, a move closely monitored by markets, especially fixed-income investors.