U.S. inflation is not yet tamed and the U.S. Federal Reserve is more likely to raise interest rates than cut them if any change is needed, Fed chair Jerome Powell said in a 9 November speech to a conference of the International Monetary Fund.

Central bank officials are “not confident” they have lifted rates high enough to wrangle inflation down to the Fed’s 2-percent target by 2026, he noted.

The central bank needs more data to determine which direction inflation is going, he added. The Fed is aware of past “head fakes,” when inflation eased for a month or two, only to rise again, and will work to avoid being “misled by a few good months of data.”

The bank has held its key interest rates steady since July, leading many investors to believe it had concluded its 22-month campaign of rate hikes that lifted interest to its highest levels since 2000. Powell’s comments disappointed them.

While hinting that rates could rise again, Powell also made it clear that they could remain where they are. “We’re in the place where we have restrictive policy, and probably significantly restrictive policy, and we’re watching the effect carefully on the economy,” he said.

TREND FORECAST: High interest rates and wage increases leveling off will help keep inflation muted across most sectors. 

However, the Mideast powder keg could explode at any time, sending oil prices high into triple digits. New weather extremes and Russia’s war in Ukraine will continue to threaten global food supplies.

Those two unpredictable factors will remain the chief variables in the inflation equation.

The Fed will keep rates at or slightly above current levels at least through 2024’s first quarter. That will continue to blunt inflation but at the cost of hampering the housing market and pushing more commercial landlords, highly-leveraged businesses, and U.S. households to the brink.

We continue to foresee a recession before the end of 2024 as the rate of personal and business bankruptcies increases through next year.