Fed’s commitment to curbing inflation is ‘unconditional,’ Powell says

Article content

The Federal Reserve’s commitment to reining in 40-year-high inflation is “unconditional” but also comes with the risk of higher unemployment, US central bank chief Jerome Powell said on Thursday.

“It’s unconditional,” Powell told the US House of Representatives Financial Services Committee when asked about the Fed’s commitment to fight inflation that, by the central bank’s preferred measure, is running at more than three times its 2% target.

“We really need to restore price stability… because without that we’re not going to be able to have a sustained period of maximum employment where the benefits are spread very widely,” he said. “It’s something we need to do, we must do.”

Advertisement 2

Article content

Powell’s testimony marked a second straight day in which he has been grilled by lawmakers in Congress over the Fed’s effort to control inflation, which is lifting fears of a sharp economic slowdown or recession and a steep rise in unemployment.

On Wednesday, Powell told the US Senate Banking Committee that the Fed was not trying to provoke a recession but that one was “certainly a possibility” with recent global events outside its control, specifically the impact of the Ukraine war and COVID-19 pandemic, making it more difficult to tame inflation without inducing a downturn.

Price pressures have continued to build for months, forcing the Fed to ramp up its tightening of financial conditions in an attempt to cool demand while hoping that some supply chain issues begin to untangle this year.

Advertisement 3

Article content

Last week, the Fed raised its benchmark overnight interest rate by three-quarters of a percentage point – its biggest hike since 1994 – to a range of 1.50% to 1.75%, and signaled its policy rate would rise to 3.4% by the end of this year.

Speaking in a June 15 news conference, Powell said the central bank would very likely need to raise rates by either 50 or 75 basis points at its next meeting in July. Since then, other Fed officials have echoed his stance on getting borrowing costs into slightly restrictive territory in short order.

Some have gone further.

Fed Governor Michelle Bowman on Thursday said she supported a 75-base-point increase in July, followed by 50-basis-point increases in “the next few” subsequent meetings, a more aggressive path of rate hikes than most of her fellow central bankers currently contemplate.

Advertisement 4

Article content

Economists polled by Reuters earlier this week forecast the Fed would deliver another 75-base-point rate hike next month, followed by a half-percentage-point rise in September, with no scaling back to quarter-percentage-point moves until November at the earliest.


There are already some tentative signs of softening of a still red-hot US labor market. Data released on Thursday showed new claims for unemployment benefits, which hit a 53-year low in March, edged down last week while a key gauge of manufacturing and services activity cooled to its slowest growth path in five months.

Under questioning by members of the House panel on Thursday, Powell said there was a risk the Fed’s actions could lead to a rise in unemployment. The US jobless rate stood at 3.6% in May.

“We don’t have precision tools,” he said, “so there is a risk that unemployment would move up, from what is historically a low level though. A labor market with 4.1% or 4.3% unemployment is still a very strong labor market. ”

At the same time, however, Powell said he expects US economic growth to pick up in the second half of the year after a sluggish start to 2022. (Reporting by Lindsay Dunsmuir, Ann Saphir and Dan Burns; Editing by Paul Simao)



Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications — you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Original Article reposted fromSource link

Disclaimer: The website autopost contents from credible news sources and we are not the original creators. If we Have added some content that belongs to you or your organization by mistake, We are sorry for that. We apologize for that and assure you that this won’t be repeated in future. If you are the rightful owner of the content used in our Website, please mail us with your Name, Organization Name, Contact Details, Copyright infringing URL and Copyright Proof (URL or Legal Document) aT spacksdigital @ gmail.com

I assure you that, I will remove the infringing content Within 48 Hours.

Leave a Reply

Your email address will not be published.