Powell Pledges to Fight Inflation With Rising Interest Rates That May Cause ‘Pain’

Fed Chairman Jerome Powell has assured Americans that Fed members will do whatever it takes to combat inflation, acknowledging that this could cause some “pain” as the US Federal Reserve applied the strongest tightening policy for decades.

The Fed on Wednesday raised interest rates by 50 basis points for the first time since 2000, and Powell said more similar moves should be expected in June and July.

However, it did not “escape” from the investors that Powell did not speak positively about the possibility of a bigger increase by 75 basis points, with the markets recording the biggest rally of the decade on the day of the Fed meeting.

In his speech after the decision, the chairman of the US Federal Reserve stressed that inflation is very high and we understand the difficulties it causes and we are moving fast to bring it down again.

Fed officials – who also decided to start cutting government bonds from next month – have been trying to curb higher inflation since the early 1980s.

At the time, President Paul Volcker raised interest rates by as much as 20% and shattered both inflation and the wider economy in the process.

The Fed hopes this time that a combination of rising borrowing costs and a shrinking balance sheet will bring about a smooth landing that avoids recession and reduces inflation, although Powell has hinted that this may not be possible without hurting the development.

The head of the Fed and his colleagues, have faced increased criticism, that they were slow to deal with inflation, which in March reached a high of 40 years, at 8.5%.

Powell said the central bank has adjusted as the data changes, and will continue to do so.