Fed considers taking more aggressive measures to fight inflation
Jerome Powell, Chairman of the Federal Reserve (Fed) indicated that they will raise their benchmark interest rate faster than expected, to a level high enough to restrict economic growth and hiring, in case it needs to control runaway inflation. .
Powell's message was more aggressive than his statements last week, when the Fed decided to increase key rates a quarter of a point from almost zero to a range of 0,25% to 0,5%, reported Diario Las Américas in its website.
During a speech to the US National Association for Business Economics (NABE), the Fed chairman made comments that sent the stock market crashing by implying that mortgages, car loans , credit cards and other consumer and business loans could see an increase.
Powell said the US central bank would be open to raising rates half a point, a comparatively aggressive hike, at upcoming Fed meetings if necessary. The Fed had not raised its benchmark rate by half a point since May 2000. .
The official added that Fed policymakers will be willing to go even to the point of sending interest rates into "tight territory" that slows economic growth and possibly raises the unemployment rate, should they need to contain high inflation.
"We will take the necessary measures to ensure a return to price stability," the Fed chairman said in his speech to NABE. "In particular, if we conclude that it is appropriate to act more aggressively in raising the federal funds rate by more than (a quarter of a point) in a single meeting or meetings, we will do so," he added.
"If we conclude that it is appropriate to act more aggressively by increasing guideline rates by more than 25 basis points in a meeting or several meetings (ndlr: monetary policy), we will do so," Powell said.
The Fed raised its guideline rates for the first time since 2018 on Wednesday to fight inflation, which hit a 40-year high in the United States.
Inflation marked 7,9% at 12 months in the United States last February, according to the CPI index of the Department of Commerce. The Fed prefers to be governed by the PCE index which accounts for 6,1% at 12 months in January.
The first rate increase was moderate, by a quarter of a percentage point, to bring them to a range of 0,25% to 0,50%.
Most members of the Fed's monetary committee expect rates of 1,75% at the end of 2022.
If the agency determines that it should go beyond the level of rates considered "neutral", 2-2,5%, "we will do it," Powell stressed.
"We are determined to restore price stability while preserving a strong labor market," Powell said.
Even with energy prices rising due to the conflict in Ukraine, "the economy is today very strong and well positioned to handle tighter monetary policy."
Source: Las Americas Newspaper
Miami Daily
Author: Andrea Rausseo 6:30 pm