US Federal Reserve Chair Jerome Powell, on Tuesday, stressed his resolve to bring inflation down by saying that he will back interest rate hikes until inflation start falling back toward a healthy level.
“If that involves moving past broadly understood levels of neutral we won’t hesitate to do that,” the chair of Fed was quoted as telling the press.
“We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down. We’ll go to that point. There won’t be any hesitation about that,” he said.
The Fed raised benchmark borrowing rates by half a percentage point, the second increase of 2022 as inflation runs around a 40-year high earlier this month.
“Following that increase that similar 50 basis point moves were likely to come at ensuing meetings so long as economic conditions remained similar to where they are now,” Powell said.
He repeated his commitment to getting inflation closer to the Fed’s 2% target, and cautioned that it might not be easy and could come at the expense of a 3.6% unemployment rate that is just above the lowest level since the late 1960s.
To recap, the U.S. economy saw growth contract at a 1.4% pace in the first quarter of 2022, due largely to ongoing supply side constraints, spread of the Omicron variant and the war in Ukraine.
Powell said he still hopes the Fed can achieve its inflation goals without tanking the economy.
“There could be some pain involved to restoring price stability” but said the labor market should remain strong, with low unemployment and higher wages,” he added.
