Powell: Fed ‘s firmly committed’ to reducing inflation

The Federal Reserve is “firmly committed” to reducing inflation after its rally to a 40-year high, and central bank officials have taken immediate action to do so, Fed Governor Jerome Powell told Congress today.

“It is crucial that we reduce inflation in order to have a prolonged period of strong labor market conditions for the benefit of all citizens,” he said during a hearing at the Senate Banking Committee.

Inflation remains well above the Fed’s official 2% target, although there is some evidence that the non-food price index and energy costs, two major categories of change, may have peaked or even fallen slightly. last month, Powell said.

Powell reports to the Senate Committee one week after the Fed decided to raise its key interest rate by 75 basis points. This was the largest increase in US interest rates since 1994. Speaking at a news conference following the central bank’s decisions last week, Powell noted that the central bank’s goal is to “reduce inflation to 2% while maintaining a strong labor market.” “. Citing the war in Ukraine and the problems in the global supply chains, the central banker clarified, however, that “what is becoming increasingly clear is that many factors we do not control will play a very important role in deciding whether this is possible or not. “.

In his statement to the Senate today, Powell reiterated that the central bank plans to continue raising interest rates “despite the pace of change. [των αυξήσεων] “It will continue to depend on the incoming data and the evolution of the economic outlook,” he said.

“Inflation has obviously exceeded estimates in recent years and new surprises are not ruled out,” he said, adding that officials should show flexibility in their response to incoming data and the evolution of the economic outlook.

Although Powell expressed confidence that the US economy is strong now, and can withstand the tightening of monetary policy, he acknowledged that it could fall into recession.

“It’s definitely a possibility,” said the Fed chief. “It is by no means the desired result, but it is certainly a possibility, and honestly the events of recent months around the world have made it harder to achieve what we want, which is 2% inflation and a strong labor market.”

Powell stressed that tighter monetary policy would be an effective tool against inflation, adding that he believed the economy was in a good position to manage higher interest rates. However, he stressed that higher interest rates will not help much in reducing rising food and gasoline costs.