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Powell says the Fed won’t hesitate to keep raising rates until inflation drops

US Federal Reserve Chairman Jerome Powell testifies before the House Financial Services Committee on its “Semi-Annual Monetary Policy Report to Congress,” in Washington, DC, on March 3, 2022.

Jonathan Ernst | Agence France-Presse | Getty Images

Chairman of the Federal Reserve Jerome Powell He reiterated his determination to bring down inflation, saying on Tuesday that he would support an increase in interest rates until prices begin to fall toward a healthy level.

“If that involves exceeding widely understood levels of neutrality, we will not hesitate to do so,” the central bank chief told the Wall Street Journal. In a live interview. “We will go until we feel we are in a place where we can say the financial conditions are in place, and we see inflation going down.

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

earlier this month, The Fed raised benchmark borrowing rates By half a percentage point, it is the second increase for 2022 as inflation hits a 40-year high.

After this increase, Powell said that similar moves of 50 basis points are likely to come in the following meetings as long as economic conditions They remain the same as they are now.

On Tuesday, he reiterated his commitment to bring inflation closer to the Fed’s 2% target, warning that that may not be easy and could come at the expense of Unemployment rate 3.6% This is just above the lowest level since the late 1960s.

“You still have a strong job market if unemployment goes up a few points,” he said. “I would say there are a number of reasonable paths to getting a soft rest as I said a soft landing. Our job is not to beat the odds, but rather to try to make it happen.”

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The US economy saw growth contracting at a pace of 1.4% in the first quarter of 2022, largely due to ongoing supply-side constraints and the spread of the omicron variable Covid and war in ukraine.

However, tighter monetary policy has heightened concerns about a sharp deflation and sparked a massive sell-off on Wall Street. In addition to the 75 basis point interest rate hike, the Fed has also halted its monthly bond-buying program, also known as quantitative easing, and will begin disposing of $9 trillion in assets it acquired starting next month.

Powell said he remains hopeful that the Fed will be able to achieve its inflation targets without hurting the economy.

“You still have a strong job market if unemployment goes up a few points. I would say there are a number of reasonable paths to get a lull as I said a soft landing. Our job is not to hold back the possibilities, it is to try and make it happen.”

He added that “there may be some pain involved in restoring price stability” but said the labor market must remain strong, with unemployment low and wages high.

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