The Federal Reserve Chair said authorities could start easing interest rate hikes as early as this month after struggling to raise borrowing costs earlier this year.
The Federal Reserve has made four sharp hikes of 0.75 percentage points since June to curb inflation, the rate at which consumer prices are rising.
Fed Chair Jerome Powell said it “makes sense” to slow down to gauge the impact of the moves.
Markets soared on the comments.
In the US, the Dow Jones Industrial Average is up more than 2%, while the S&P 500 is up 3% and the Nasdaq is up 4.41%. The dollar fell while other global exchanges also rallied.
The US has spurred a global shift as central banks sharply hike interest rates after years of low borrowing costs to try to stem rising prices.
The Fed’s interest rate rose from near zero to over 3.8% in March – the highest rate since January 2008.
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By raising interest rates, authorities are making it more expensive to borrow money to dampen demand for big-ticket items like cars and houses and ease inflation, which is now near its highest level in 40 years.
In the US, higher borrowing costs have already hit sectors such as housing, where home sales have fallen sharply.
But it usually takes months for the effects of the measures to be absorbed. Analysts have warned the Fed risks triggering a serious economic slowdown that would put millions of people out of work.
That’s because companies make less money when economies shrink, which means they may end up downsizing.
“The full impact of our rapid tightening to date has yet to be felt,” Powell said in his speech on Wednesday.
“Hence, it makes sense to slow the pace of our rate hikes… The time to moderate the pace of rate hikes could come as early as the December meeting.”
Mr. Powell’s comments come amid signs that US inflation may be slowing. Inflation has eased from its peak of 9.1% in June, falling to 7.7% in October.
But Mr Powell said the labor market, including wage growth, remains too strong for the bank’s comfort.
“Despite some promising developments, we still have a long way to go to restore price stability,” he said, warning that the Fed still plans to hike rates, albeit at a slower pace.
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