Fed Chairman Powell claims the central bank will do whatever it takes to combat inflation

Federal Reserve Chairman Jerome Powell recently said that the central bank is willing to take more aggressive measures to reduce inflation, including boosting interest rates by half a percentage point, if needed. On Monday, Powell used a direct tone in remarks at an economic conference when asked how far the Fed would be ready to go to combat rising prices. 

He stated, “We will take the necessary steps to ensure a return to price stability. In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

His comments come just days after the Federal Reserve declared that it will boost its interest rate goal by a quarter of a percentage point to combat the country’s rising inflation. Because of the uncertainties surrounding the war in Ukraine and the pandemic, the central bank decided against a more aggressive increase. Consumer prices increased by 7.9% in the year ending in February, indicating that inflation is on the rise. For months, some economists have been clamoring for stricter monetary policy, believing that Powell and other members of the Federal Open Market Committee have been too relaxed about the dangers of inflation.

While Powell acknowledged that inflation has been “much greater and more persistent” than expected, he pushed back against those who believe that measures to slow the economy and lower prices will result in a recession. He explained that the economy is in good shape and well-positioned to withstand tighter monetary policy.

James Bullard, president of the St. Louis Federal Reserve said it will take at least a dozen rate hikes over the next year to fight inflation and that the rate hike target should be increased to half a percentage point. He stated, “The combination of strong real economic performance and unexpectedly high inflation means that the committee’s policy rate is currently far too low to prudently manage the U.S. macroeconomic situation. Moreover, U.S. monetary policy has been unwittingly easing further because inflation has risen sharply while the policy rate has remained very low, pushing short-term real interest rates lower.” 

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