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- Tougher borrowing conditions could be required to control inflation in the U.S.
- Fed Chair declared that the economic figures show ongoing progress towards goals.
- The recent economic activity and increase in longer-term interest rates have led to a surge in U.S. mortgage rates.
According to Federal Reserve Chair Jerome Powel, the U.S. economy’s strength and the country’s ongoing tight labor markets may necessitate stricter lending requirements to control inflation.
Recent economic figures show “ongoing progress,” according to Powell. In a speech, he said, “Incoming data over recent months show ongoing progress toward both of our dual mandate goals – maximum employment and stable prices.”
The Wall Street Journal reported that the chair suggested the run-up in long-term Treasury yield could allow the central bank to suspend a historic run of interest rate increases. This would only happen if the recent progress on inflation continued.
Short-term interest rates would be held steady, as the rise in long-term interest rates could slow the economy. Yields on the 10-year Treasury note came close to 5%, which is considered a 16-year high. On Thursday, October 19, the number stood at 4.987%, which is up from Wednesday’s 4.902%.
Powell mentioned that the purpose of raising interest rates would be to affect financial conditions. He added that higher bond rates were producing tighter financial markets at the moment.
The increase in longer-term interest rates could influence a range of borrowing costs. Moreover, data showed that in recent days, U.S. mortgage lenders have been quoting rates as high as 8% on a 30-year fixed-rate loan, a level that hasn’t been seen since 2000.
The current economic activity has reportedly made it difficult for the Fed to announce an end to rate rises. Chief Economist Tim Duy addressed this and stated, “Powell is not going to signal a hard stop to rate hikes.”
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