The Federal Reserve’s intention to take the necessary steps to bring inflation back to acceptable levels was stressed by US Federal Reserve Chairman Jerome Powell at the regular press conference following the two-day Federal Open Committee meeting.
The Fed chairman acknowledged that US inflation was “very high”, which he said had led the central bank to “adjust” its policy and “will continue to do so”.
Powell stressed that the central bank understands the difficulties faced by Americans in raising prices and pledged that the Fed will use all the tools at its disposal to reduce inflation.
Regarding today’s decision to increase by 75 basis points, the head of the Fed stressed that it is an “unusual” move, which was necessary due to the unexpected jump in inflation in May, while he did not rule out a similar increase next month. .
“Clearly, the current increase of 75 basis points is unusually large and I do not expect moves of this magnitude to become commonplace,” he said, adding that “based on current estimates, an increase of either 50 or 75 basis points seems likely in our next meeting “.
“We expect the continuing interest rate hikes to be appropriate,” Powell said, adding, however, that “the pace of change will continue to depend on the data and the economic outlook.”
As Powell explained in relation to today’s decision, the Fed considered that an “advance” increase in interest rates was necessary, as they must rise to a “restrictive level” in order to reduce inflation, adding that the goal is to limit demand.
He assured, however, that the central bank is not trying to lead the economy into recession, while reiterating that it does not see any signs of a broad slowdown in the economy.
Referring to unemployment, the Fed chairman stressed that there is a great demand for labor and insufficient supply, a problem that he hopes will ease with the increase in interest rates. It is noted that the unemployment rate in the US is close to the 54-year low of 3.6% and is expected to increase slightly this year to 3.7% at the end of the year and to 4.1% in 2024.
“We do not seek to leave people without jobs,” Powell said, “but we need price stability. We need to restore it” in order to have a good labor market in the long run.
If the Fed forecasts are correct, the central bank has hinted that it will be able to cut interest rates again by 2024. The central bank predicts that the short-term interest rate will fall to 3.4% from 3.8%.
Source: Capital
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