Powell says Fed will hike further and faster if necessary
2 years, 9 months ago

Powell says Fed will hike further and faster if necessary

Associated Press  

WASHINGTON — Chair Jerome Powell said Monday that the Federal Reserve would raise its benchmark short-term interest rate faster than expected, and high enough to restrain growth and hiring, if it decides this would be necessary to slow rampaging inflation. He added, too, that the policymakers could go so far as to send rates into “restrictive” territory that would slow economic growth and possibly raise the unemployment rate, if needed to tame high inflation. Powell cautioned Monday that those projections of future interest rates and inflation “can become outdated quickly at times like these, when events are developing rapidly.” According to an NABE survey of its member economists, 77% think the Fed’s interest rate policy remains too low. “I believe that the historical record provides some grounds for optimism,” he said “Soft, or at least soft-ish, landings have been relatively common in U.S. monetary history.” Still, the Fed chair added that “no one expects that bringing about a soft landing will be straightforward in the current context — very little is straightforward in the current context.” He acknowledged that higher oil and commodity prices serve as a reminder of the oil price spikes of the 1970s, which fed soaring inflation in that decade. He suggested that higher rates from the Fed could slow consumer spending enough to reduce that outsize demand for workers, which would, in turn, reduce wage growth to a level that wouldn’t boost inflation.

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