In the current reality, the main obstacle to reducing inflation to target levels is a stronger-than-expected U.S. economy.
“Signs that the economy may not be cooling as much as initially expected and a possible recovery in the housing sector could jeopardize further progress in the fight against inflation,” Powell said. This, in turn, could lead to additional tightening of monetary policy, he warned.
In the second quarter of this year, U.S. GDP grew by 2.4%, which was significantly higher than the expectations of analysts polled by Reuters (1.8%), and also more than the growth of real GDP in the first quarter of this year. Retail sales and new home sales also exceeded analysts’ expectations. Triggers for a possible additional rate hike could be, for example, evidence that economic growth is steadily above the long-term trend or that there is no correction in the overheated labor market, says Olga Belenkaya from FG Finam.