United States Federal Reserve Chair Jerome Powell said on Thursday that "a range of uncertainties, both old and new, complicate our task of balancing the risk of tightening monetary policy too much against the risk of tightening too little" and the central bank will proceed "carefully" for that reason.
Overtightening could unnecessarily damage the economy, while doing less than what is needed could "allow above-target inflation to become entrenched" and later lead to even stronger tightening that would significantly hurt the labor market, he noted in a speech at the Economic Club of New York.
The road to sustainable 2% inflation is "likely to be bumpy and take some time," he warned. Although "economic growth has consistently surprised to the upside" in 2023, "geopolitical tensions are highly elevated and pose important risks to global economic activity," according to the Fed chair. Powell stressed that the recent rise in bond yields has been one of the main causes of further tightening of financial conditions.
