Powell and peers vow to keep fighting inflation until there is evidence they’ve succeeded

The top central bankers in the world on Wednesday vowed to keep working to slay the inflation dragon and not stopping until there is evidence they have succeeded.

“Although policy is restrictive, it may not be restrictive enough and it has not been restrictive for long enough,” said Fed Chair Jerome Powell, noting that a strong majority of his colleagues expect two more rate hikes this year.

Powell spoke alongside Christine Lagarde, the head of the European Central Bank, Andrew Bailey, the head of the Bank of England and Kazuo Ueda, the head of the Bank of Japan, at the ECB’s annual forum in Sintra, Portugal.

Powell, Lagarde and Bailey are each fighting above-target inflation. The three central bankers talked about needing confirmation that their rate hikes were working before they would move away from hikes.

“We will be evidence driven so we will wait for the next set of evidence for our next meeting,” Bailey said, in the wake of the Bank of England’s 50 basis point hike last week.

“We are data dependent, we will decide meeting by meeting,” added Lagarde. She said that if the ECB’s baseline view is met than a rate hike in July is very likely.

The pound GBPUSD, -0.89% has gained 4% vs. the dollar, and the euro EURUSD, -0.44% has increased by 2% vs. the greenback, on expectations those central banks have more rate hikes to make than the U.S. does.

Central bankers acknowledged that they are in a tricky place because the economic data is not sending clear signals.

Powell said that the data has been “foggier.”

A key unknown for the central banks is how much of the negative impact from their rate hikes have yet to be felt by households and businesses. This is known as the “lag” of tightening policy.

Source: Market Watch