Federal Reserve Chairman Jerome Powell expects “significant declines” in U.S. inflation in 2023, but he also said a surprisingly strong jobs report in January underscores the need to keep raising interest rates.
“We think we need to do further rate increases,” Powell said in an interview Tuesday at the Economic Club of Washington. “And we think that we’ll need to hold policy at a restrictive level for a period of time.”
Several other senior officials at the Fed said this week the central bank needs to raise interest rates higher to help subdue inflation in the wake of the January jobs report.
The U.S. gained an estimated 517,000 jobs last month, defying expectations of a big slowdown in employment. The unemployment rate fell to a nearly 54-year low of 3.4%.
The Fed has been raising interest rates to bring down high inflation, a strategy that rests in part in slowing the economy enough to cool off the labor market.
Senior Fed officials worry a shortage of labor will continue to drive up worker pay and add to inflation pressures, making it harder to get prices back under control.
After the Fed raised interest rates again last week, Powell said the central bank was only likely to do so a “couple more times.”
His comments came after a firmer statement put out by the bank after the rate hike. Critics said his more dovish comments were counterproductive, giving the signal the Fed wasn’t willing to raise rates as high as necessary to tame inflation.
Read: Powell delivered ‘most counterproductive press conference’ in memory: Larry Lindsey