The United States is watching disinflation travel through the national economy, but “it has a long way to go” before price stability is achieved, says Federal Reserve Chair Jerome Powell.
Speaking at the Economic Club of Washington on Tuesday, the Fed chair acknowledged that the country is in the “very early stages of disinflation.” However, many parts of the marketplace are still experiencing elevated inflation, he said, alluding to the services sector.
In December, services inflation climbed to 7.5 percent year-over-year, according to the Bureau of Labor Statistics. That is the highest level since August 1982.
According to Powell, it is going to take time to return inflation to the central bank’s 2 percent target, and the road to this aim is “probably going to be bumpy.” As a result, he believes that the Fed will need to hold the policy rate at a restrictive level for an extended period.
“We expect 2023 to be a year of significant declines in inflation. It’s actually our job to make sure that that’s the case,” Powell told Carlyle Group co-founder David Rubenstein at the event. “My guess is it will take certainly into not just this year, but next year to get down close to 2 percent.”