Jerome Powell strongly hints the Fed will pause further rate hikes after latest increase

Federal Reserve Chair Jerome Powell indicated the central bank could finally be done increasing rates moments after approving the latest 25-basis-point hike on Wednesday.

Powell cited a “meaningful change” of the Fed’s language from its March statement that eliminated a key phrase — that additional policy increases might be appropriate, implying that a pause is very likely.

Powell’s comment during his press conference came after the committee agreed on the 10th straight increase aimed at bringing down decades-high inflation.

The 25 bps hike lifted the benchmark federal funds rate to a range between 5% and 5.25%, a 16-year high.

Powell said the committee will be taking a “data-dependent approach” moving forward, and noted that inflation “continues to run high”

He later clarified that “rates are going to come down” over a long period of time, and said that a decision about whether to pause the tightening cycle will come at the June meeting

The latest rate hike comes the same week that the FDIC stepped in to seize First Republic Bank — marking the second-largest bank failure in US history by assets — and to sell it to JPMorgan Chase.

The Fed has been blamed for the growing bank crisis — which has also seen the collapse of Silicon Valley Bank and Signature Bank of New York — because of how quickly it jacked up of the benchmark rate over the past year.

Powell pushed back on that narrative.

“I think it’s actually a good outcome for the banking system,” Powell said at the press conference of the JPMorgan acquisition.

When asked if the latest rate hike is sufficiently restrictive, Powell said: “That’s an ongoing assessment.”

Powell admitted that the country still faces the possibility of a recession later this year as the Fed seeks to bring inflation down to its target of 2%.

Inflation peaked at 9.1% last June — the highest since the 1980s — and has remained stubbornly high.

It was at 5% in March.

“We’re always going to have a 2% as our target,” Powell said, adding that he doesn’t think “that it will be a smooth process” and that reaching the goal “will take some time.”

Powell also cited wage increases “moving down to more sustainable levels” — “which is a good thing” — and a “50-year low unemployment” rate as the positive effects the Fed’s aggressive drive to tame inflation are having.

Meanwhile, many banks have tightened their lending standards since the failure of three major US banks, making it even harder to borrow to buy a house or a car or to expand a business.