According to Powell, the Fed will not hesitate to continue raising rates until inflation comes down

Federal Reserve Chairman Jerome Powell testifies before the House Financial Services Committee on the Semiannual Monetary Policy Report to the Congress on March 3, 2022 in Washington, DC.

Jonathan Ernest | AFP | Getty Images

Federal Reserve Chair Jerome Powell stressed his determination to bring inflation down and said on Tuesday he would support rate hikes until prices fall back to healthy levels.

“If that means going beyond well-known neutral levels, then we will have no hesitation in doing so,” the central bank governor told the Wall Street Journal in a livestream interview. “We’re going to go until we feel like we’ve gotten to a point where we can say financial conditions are in a proper place, we see inflation coming down.

“We will go to this point. There will be no hesitation,” he added.

Earlier this month, the Fed raised interest rates by half a percentage point, the second hike in 2022, as inflation is at a 40-year high.

Powell said after the raise that as long as economic conditions remain similar to now, similar moves of 50 basis points are likely to occur in subsequent sessions.

On Tuesday, he reiterated his pledge to bring inflation closer to the Fed’s 2% target, warning that doing so may not be easy and could come at the cost of an unemployment rate of 3.6%, just above its lowest Stand since the late 1960s.

“You would still have a strong job market if unemployment went up a few notches,” he said. “I would say there are a number of plausible ways to achieve a soft, as I said, soft landing. Our job is not to spoil the chances, but to try to make that happen.”

The US economy recorded a 1.4% growth slowdown in the first quarter of 2022, mainly due to ongoing supply-side constraints, the spread of the Omicron Covid variant and the war in Ukraine.

However, tightening monetary policy has heightened concerns of a deeper downturn and prompted an aggressive sell-off on Wall Street. In addition to raising interest rates by 75 basis points, the Fed has also halted its monthly bond-buying program, also known as quantitative easing, and will begin unwinding some of the $9 trillion in assets it has purchased starting next month .

Powell said he still hopes the Fed can meet its inflation targets without hurting the economy.

“You would still have a strong job market if unemployment went up a few notches. I would say there are a number of plausible ways to achieve a soft, as I said, soft landing. Our job isn’t to spoil the chances, it’s to try to achieve that,” he said.

He added that “restoring price stability might come with some pain” but said the labor market should remain strong with low unemployment and higher wages.

https://www.cnbc.com/2022/05/17/powell-says-the-fed-will-not-hesitate-to-keep-raising-rates-until-inflation-comes-down.html According to Powell, the Fed will not hesitate to continue raising rates until inflation comes down

Jane Marczewski

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