Federal Reserve Chair Jerome Powell said policymakers expect interest rates will need to move higher to reduce U.S. growth to below its long-term trend and contain price pressures, with the timing of additional increases based on incoming data.

“My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal,” Powell said Wednesday in prepared remarks to be delivered to the House Financial Services Committee. “We will continue to make our decisions meeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation, as well as the balance of risks.”

The Federal Open Market Committee paused its series of interest-rate hikes last week for the first time in 15 months, leaving rates in a range of 5% to 5.25%. But Fed officials estimated rates would rise to 5.6% by the end of the year, according to their median projection, implying two additional quarter-point hikes following surprisingly persistent inflation and labor-market strength.

“Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” Powell said. “Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions.”

Powell is set to appear on Capitol Hill this week for his semi-annual monetary policy testimony, the first time the Fed chief will answer questions from Congress in public since early March. He will testify before the House panel Wednesday at 10 a.m., and the Senate Banking committee on Thursday.

His prepared comments largely echoed his remarks at his post-meeting press conference last week, where he said the committee felt it was appropriate to moderate the pace of rate increases following the most aggressive hiking in four decades as well as recent bank failures that might tighten credit conditions. At the same time, he said that the vast majority of the committee projected higher rates will be needed to tame inflation.

“In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, we will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” Powell will tell lawmakers.

Fed officials have been disappointed in the pace of slowing inflation and are targeting a period of below-trend growth to reduce price pressures. The FOMC last week upgraded its view of economic growth and the labor market for 2023, but now is anticipating a rise in unemployment to 4.5% next year.

The Fed chair has faced criticism from some Democrats for his aggressive interest-rate hikes, with Sen. Elizabeth Warren, for example, warning that his policies risk putting millions of people out of work.

Powell described the labor market as “very tight,” though the unemployment rate rose in May to 3.7%. “There are some signs that supply and demand in the labor market are coming into better balance,” he said.

Powell cited the Fed’s characterization in its semi-annual report to Congress released Friday of tighter U.S. credit conditions following bank failures in March.

“The economy is facing headwinds from tighter credit conditions for households and businesses, which are likely to weigh on economic activity, hiring, and inflation,” he said. “The extent of these effects remains uncertain.”

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