Monetary policy

Federal Reserve Chair Jerome Powell says crushing inflation is the most important thing the Fed can do to reduce costs in the housing market. Some economists and policy specialists say higher rates are not the only tool at its disposal.

In a speech, the Federal Reserve governor said she would have liked to see the Federal Open Market Committee move more quickly to reduce its holdings. The central bank is poised to begin slowing the pace of balance sheet runoff this week.

The Federal Open Market Committee held the federal funds rate at current levels, citing "lack of further progress" toward meeting inflation goals.

During this week's Federal Open Market Committee meeting, officials voted to lower the cap on the amount of Treasury securities that can roll off the central bank's books each month from $60 billion to $25 billion.

Banks and other financial market participants have been keyed into the central bank's communications around monetary policy expectations. But in an unpredictable economy, the guidance doesn't always hit the mark.

According to the Federal Reserve Board's latest financial stability report, persistent inflation and policy uncertainty are the primary worries for banks. Survey respondents expressed heightened anxiety over murky policy outlooks due to geopolitical turmoil and rapidly approaching domestic elections.

Global yields rose on Thursday as markets around the world adjusted to central banks keeping interest rates higher for longer, with the US two-year yield briefly exceeding 5% for the first time since November.

Federal Reserve Chair Jerome Powell said at the Federal Open Market Committee press conference Wednesday that a slower pace of reduction could help the central bank avoid shrinking its holdings further without disrupting the banking system.

Federal Reserve Chair Jerome Powell last week suggested the central bank is getting close to the confidence it needs to start lowering interest rates.

Jefferson voiced cautious optimism that inflation is headed lower despite a blip in January and said the Fed is likely to begin cutting interest rates later this year.