RT.com
23 Jun 2022, 15:50 GMT+10
The Federal Reserve must accelerate rate hikes further if it hopes to rein in inflation, its top official has claimed
The Federal Reserve will have to further accelerate increasing interest rates in order to rein in inflation, which is already at 40-year highs, its chairman Jerome Powell told the Senate Banking Committee on Wednesday.
"I think that the most recent inflation indicators, [the] various kinds, suggest to us that we need to accelerate the pace at which we can get up to a level that is neutral," he said, calling for a "restrictive policy" that would slow the growth of the monetary supply and reduce inflation to a "neutral" pace - the 2% target sought by the central bank.
So-called "restrictive policies" are designed to raise interest rates high enough that price growth slows down - a critical goal amid the relentless inflationary climb currently plaguing the American economy.
Explaining the Fed's aim at achieving an economic "soft landing" by keeping the job market growing even in the midst of interest rate hikes, Powell admitted success would be "very challenging."
"We've never said it was going to be easy or straightforward. It's going to be challenging and the events of the last few months have certainly made it more challenging. Nonetheless, there are pathways through which that could happen," he pleaded.
However, in a nod to recent polls showing just 11% of Americans believe the "Putin's price hike" explanation for the current state of the US economy, Powell noted that "inflation was high, certainly before the war in Ukraine broke out" when asked by Senator Bill Hagerty (R-Tennessee) about what precisely was causing the surging inflation.
Powell already announced a 0.75% interest rate hike last week, the largest in 28 years, bringing the total interest rate to 1.75%, in a move aimed at dropping inflation down to 2%. Projections published by the central bank suggested interest rates could be as high as 3.4% by the end of the year.
He said at the time that the Fed wasn't planning on increasing the pace of its interest rate hikes. However, this week's testimony before Congress indicates otherwise.
With inflation showing no signs of slowing, the central bank may feel the situation has become more urgent - inflation grew at an annualized rate of 8.6% in May, over four times the 2% target preferred by the central bank.
However, many economists are concerned that raising rates too much too quickly will plunge the US into a recession. The US economy will officially be in a recession if the second quarter does not reflect positive growth, as it has experienced negative 1.4% growth for the first quarter already.
READ MORE: Largest US interest rate hike since 1990s announced
The chair has insisted the rate increases aren't meant to induce a recession, even while acknowledging the difficulty of achieving a "soft landing" - striking a balance between keeping debt from spiraling out of control and holding down inflation.
Powell has nevertheless pointed out that the Fed's primary priority is cutting back on inflation. "Clearly, people do not like inflation," he said.
(RT.com)
Get a daily dose of Ohio Standard news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Ohio Standard.
More InformationWASHINGTON, D.C.: Filmmaker Peter Jackson's lifelong fascination with the extinct giant New Zealand flightless bird called the moa...
DUBAI, U.A.E.: A cargo ship flagged under Liberia, known as the Eternity C, sank in the Red Sea following an attack executed by Yemen's...
NEW DELHI, India: India has submitted a revised proposal to the World Trade Organization (WTO) in Geneva to implement retaliatory tariffs...
WASHINGTON, D.C.: The Trump administration has started sending some weapons to Ukraine again, just a week after the Pentagon told officials...
SAN FRANCISCO, California: Nvidia, the Silicon Valley chipmaker at the heart of the artificial intelligence boom, this week briefly...
REDMOND, Washington: Artificial intelligence is transforming Microsoft's bottom line. The company saved over US$500 million last year...
DUBAI, U.A.E.: A cargo ship flagged under Liberia, known as the Eternity C, sank in the Red Sea following an attack executed by Yemen's...
WASHINGTON, D.C.: The Trump administration has started sending some weapons to Ukraine again, just a week after the Pentagon told officials...
ECAULT BEACH, France: On clear days, the white cliffs of the United Kingdom, are visible from northern France, where men, women, and...
ATLANTA, Georgia: The United States is facing its worst measles outbreak in more than three decades, with 1,288 confirmed cases so...
In the past month alone, 23 Israeli soldiers have been killed in Gaza—three more than the number of remaining living hostages held...
LONDON, U.K.: At least 13 people are believed to have taken their own lives as a result of the U.K.'s Post Office scandal, in which...