The Fed chair has promised to fight inflation because it is going too far now
Federal Reserve Chairman Jerome Powell told House lawmakers on Wednesday that the agency has the power to reduce inflation and is committed to doing so.
We are aware of the difficulty of creating high inflation in the Fed. In a testimony to the Senate Banking Committee, the Fed chairman said, “We are deeply committed to reducing inflation, and we are moving fast to do so. To restore price stability for American families and companies, we have both the necessary materials and the necessary determination.
In addition to pledging to fight inflation, Powell said the overall state of the economy is positive, with a strong labor market and steadily rising demand.
He acknowledged that inflation needs to cool down because it is so high now.
According to Powell, “In the next few months, we will look for persuasive evidence that inflation is going down, consistent with a return to 2 percent.” “We think a steady rate increase would be reasonable; The rate of change will continue to be influenced by incoming data and changing economic outlook, ”the statement said.
He says inflation is being exacerbated by the conflict in Ukraine and the China-related blackout with Kovid, adding that it is a problem that is hurting not only the US economy but many other countries as well.
In line with congressional obligations, Powell’s remarks are part of a half-yearly monetary policy report known to the market as the Humphrey Hawkins Report and Testimony.
For Fed policy, this is a very delicate time.
In an effort to combat inflation, which is currently at its fastest annual pace in more than 40 years, the central bank has raised its rate by a total of 150 basis points, or 1.5 percentage points, in its last three meetings.
Last week’s meeting of the Federal Open Market Committee saw a 75 basis point increase, the largest single increase since 1994.
Powell reiterated his belief that tight monetary policy would be a successful tool against inflation and that the economy was ready to withstand high rates.
Although the economy has slowed this year, errors have become visible and suggest that higher rates are on the way.
According to the Atlanta Fed, gross domestic product in the first quarter fell 1.5 percent annually and is expected to flatten in the second quarter. At a time when inflation-adjusted wages are down 3% year-on-year, housing sales are declining, and there are even indications that the job market is slowly declining.
Powell and his fellow policymakers say rates will continue to rise despite the economic downturn. According to estimates made at last week’s meeting, the Fed’s benchmark short-term lending rate will increase from the current planned 1.5 percent -17.5 percent to 3.4 percent by the end of this year.
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