US Federal Reserve Chair Jerome Powell said Wednesday that nearly all voting members of the central bank believe further rate hikes would likely be appropriate in 2023.
Powell's post-meeting comments came after the Fed skipped a rate hike for the first time since January 2022, but left the door open for two more rate increases of 25 basis points each during the remainder of its meetings later this year.
"US economy slowed significantly last year, and recent indicators suggest that economic activity has continued to expand at a modest pace," he said. "Activity in the housing market remains weak, largely reflecting higher mortgage rates."
"Higher interest rates and slower output growth also appear to be weighing on business-fixed investment," he said.
Powell said voting members on Federal Open Market Committee (FOMC) generally expect subdued economic growth to continue.
"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. It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation," he said.
The Fed chair stressed that the American economy is facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on economic activity, hiring and inflation.
"The extent of these effects remain uncertain," he added.
Despite the gloomy outlook for the American economy, the Fed raised its growth forecast to 1% for 2023, up from its previous projection of 0.4% made in March.
The growth expectations for 2024 and 2025, however, were revised down by 0.1 percentage point each, down to 1.1% and 1.8%, respectively, from 1.2% and 1.9%.
