Attending the European Central Bank Forum… “Time to respond to inflation is running out”
Federal Reserve Chairman Jerome Powell said on the 29th (local time) that the U.S. must take the risk of a recession to face its worst inflation.
“The risk exists because we go too far, of course,” said Powell, who is attending the European Central Bank (ECB) forum in Portugal. “But I don’t agree that it’s a bigger risk.
“The bigger mistake is to fail to restore price stability,” he said.
Faced with its worst inflation in 40 years, the Fed has been raising rates rapidly in a row, including the recent 0.75 percentage point hike in the benchmark interest rate.
Chairman Powell reiterated the need to raise interest rates quickly to combat inflation early, even at the risk of a recession.
“The time is running out for us to stay in the low-price regime,” he asserted.
“The US economy is still in a strong shape,” he predicted.
Chairman Powell said, “There is no guarantee,” he said, referring to the rise in energy and food prices after Russia’s invasion of Ukraine.
“It’s very likely that there will be some pain in the process, but the worse pain is failing to catch inflation and allowing it to persist,” he added.
Chairman Powell also said, “The so-called ‘soft landing’ is going into a more challenging situation.”
Cleveland Federal Reserve Bank President Loretta Mester also warned that it is more dangerous to judge that inflation has been caught prematurely than the side effects of a rate hike.
Chairman Powell told the Senate Banking Committee on the 22nd that “there is a possibility of a recession and a soft landing is very challenging.”
“We need to bring inflation back to the 2% level,” he said.
The Fed will hold a two-day meeting of the Federal Open Market Committee (FOMC) on the 25th of next month to discuss interest rate hikes.
/yunhap news
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