The Federal Reserve is “strongly committed” to reducing the inflationwhich is at a 40-year high, and policymakers are reacting “quickly to do so,” US central bank chief Trump said on Wednesday morning. Jerome Powell.
“It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit everyone,” Powell said in a speech prepared for a hearing before the US Senate Banking Committee.
Inflation remains well above the Fed’s 2% target, although there are some signs that a gauge of rising prices that excludes volatile food and energy costs may have stabilized or softened somewhat last month. Powell said.
The Fed chief appeared before the Senate committee a week after the US central bank raised its overnight benchmark interest rate by three-quarters of a percentage point. its biggest rise since 1994.
At a news conference after the decision, Powell also explained the increasingly difficult road ahead for the bank to bring down inflation without causing major damage to the economy in the process, especially a significant rise in unemployment.
“Our goal is really to get inflation down to 2% while the labor market remains strong … What is becoming increasingly clear is that many factors that we don’t control are going to play a very significant role in deciding whether to that’s possible or not,” Powell said last week, citing the war in Ukraine and supply concerns.
There is a way for us to get there (…) It is not easier. It’s getting more challenging,” she noted.
In his statement before the Senate committee on Wednesday, Powell reiterated that continued hikes in the Fed’s policy rate would be appropriate, but “the pace of those changes will continue to depend on incoming data and developments in the outlook for the economy.” “.
“Inflation has surprised obviously up over the past year, and there could be more surprises,” he said, adding that policymakers would need to be “nimble” in response to incoming data and evolving outlooks.
Powell’s comments before the committee also showed how much the inflation environment has changed in the three months since he submitted the first of his semi-annual reports to lawmakers.
At the time, he described inflation – which was running at 6% a year by the Fed’s preferred measure – as “probably on the downside over the course of the year.”
Since then, there has been no sign of it, despite three rate hikes that have lifted the official Fed rate to a range of 1.50%-1.75% from almost zero in the space of 13 weeks, and with more Loan cost increases to come.
Projections released by Fed officials last week show that they expect economic growth to slow below trend this year, while the US unemployment rate, currently at 3.6%, begins to decline. go up.
Meanwhile, they have substantially toned down their expectations for how quickly inflation will decline, with a median forecast for an annual rate at the end of the year that has eased to 5.2%, by their preferred measure, from 6.3% in April. In March, the figure was 4.3 percent.