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Powell told Congress that the Fed is “strongly committed” to inflation, noting that a recession is a “potential.”

Federal Reserve Chair Jerome Powell The central bank is determined to reduce inflation and has the capacity to make it happen, he told parliamentarians Wednesday.

The Federal Reserve said in a statement from the Senate Banking Commission, “The Fed understands the difficulties posed by high inflation. It is strongly committed to reversing inflation and should do so promptly. It’s moving to. ” “We have both the tools we need and the determination we need to restore price stability on behalf of American families and businesses.”

Powell expressed his determination to inflation and said the economic situation was generally good, with a strong labor market and sustained high demand.

But Senator Elizabeth Warren (D-Mass.) Warned Powell that continued rate hikes could “put the economy into recession” without stopping inflation.

“What’s worse than high inflation and low unemployment is high inflation and a recession where millions of people are unemployed. Rethink it before you drive the economy off the cliff,” she said. rice field.

Powell said he believed the current economy was strong, but acknowledged that a recession could occur.

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“That’s certainly a possibility,” he said. “That’s not our intended result, but it’s certainly possible. Frankly, what we want is 2% inflation and a still strong workforce due to events in the last few months around the world. Is becoming more difficult to achieve in the market. “

He added that it would be difficult to achieve a “soft landing” in which policies are tightened without severe economic conditions such as recession.

“That’s our goal. It’s going to be very challenging. With the events of the last few months, it’s very challenging here given the war and commodity prices, and further supply chain issues. Now, “Powell said. “The question of whether we can achieve that will depend to some extent on factors that we have no control over.”

US Federal Reserve Chair Jerome Powell will arrive at the Senate Bank, Housing, and Urban Affairs Commission in Washington, DC, USA on Wednesday, June 22, 2022.

Tin Shen | Bloomberg | Getty Images

Powell insisted on it Inflation rate is too high You need to get off. The May consumer price index has risen 8.6% over the past year, the highest level since December 1981.

“We are looking for compelling evidence that inflation is declining, consistent with inflation returning to 2% in the coming months,” Powell said. “We expect continuous rate hikes to be appropriate. The pace of these changes will continue to depend on incoming data and the evolutionary outlook for the economy.”

He, War in Ukraine He added that the Covid-related shutdown in China has increased inflationary pressures, and that the problem is not unique to the United States, but is affecting many global economies.

Powell’s remarks are part of a semi-annual report mandated by Congress on monetary policy. The market is more commonly known as Humphrey Hawkins’ reports and testimonies about the acts that mandated them.

This is a particularly delicate moment for the Fed’s policies.

At three meetings, the central bank has raised interest rates by a cumulative total of 150 basis points (1.5 percent points) to tackle inflation, which is running at the fastest annual pace in over 40 years.

The Increased 75 basis points Last week’s Federal Open Market Committee meeting made the largest single increase since 1994. Powell said he expects interest rates to rise to “moderately restricted levels.”

Republican senators have pressured Powell to curb inflation and asked if White House policies, such as energy industry regulation, are increasing price pressure.

“Inflation has hit my people so much that they are coughing their bones,” said Senator John Kennedy of Louisiana.

“We are now in hell of turmoil,” Kennedy added. “You are probably the most powerful man in the United States and in the world.”

Powell emphasized that monetary tightening policies would be an effective tool for inflation, and said the economy was in a good position to handle higher interest rates. But he also told Warren that higher prices would not be very effective in lowering the cost of soaring food and gasoline.

There are cracks in the economy this year, indicating that higher interest rates are coming as the economy is already slowing down.

Gross domestic product declined at an annual rate of 1.5% in the first quarter, At a flat pace In the second quarter, according to the Atlanta Federation. Home sales have plummeted, and there are even signs that the employment market is slowly slowing when inflation-adjusted wages have fallen by 3% over the past year.

Despite the economic turmoil, Powell and his fellow policy makers have shown that rate hikes will continue. Forecasts released at last week’s meeting show that the Fed’s benchmark short-term borrowing rates will rise from the current target range of 1.5% to 1.75% to 3.4% by the end of this year.

Correction: The Fed’s benchmark short-term borrowing rates are currently in the 1.5% -1.75% target range. The range was wrong in previous versions.

Powell told Congress that the Fed is “strongly committed” to inflation, noting that a recession is a “potential.”

Source link Powell told Congress that the Fed is “strongly committed” to inflation, noting that a recession is a “potential.”

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