Federal Reserve Chair Powell has stated that financial authorities will take “necessary steps” to slow inflation. He acknowledged that it could raise rates at a faster pace than currently expected, eventually slowing the economy as a whole.
The Federal Open Market Committee (FOMC) raised its federal funds rate guidance target by 0.25 points at its regular meeting last week. The rate hike will be the first since December 2018. The median forecast of FOMC participants also suggests that the rate will be raised by 0.25 points six more times this year. The fed funds rate is expected to reach 2.8% in 2023, exceeding the neutral rate of about 2.4%. Neutral interest rates are theoretical levels that do not accelerate or slow the economy.
Chair Powell gave a lecture at the National Association for Business Economics (NABE) on the 21st. According to the pre-distributed manuscript, “If we come to the conclusion that it is appropriate to move more aggressively and raise the fed funds rate target by more than 0.25 points at one or more meetings, we will do so. Pointed out. “If we decide that we need to tighten into a more restrained stance beyond the normally expected neutral levels, we’re thinking of doing so,” he said.
FOMC dot plot
Source: Bloomberg
He also noted that Russia’s invasion of Ukraine “in a situation where inflation is already too high” has pushed up prices for food, energy and other commodities, exacerbating inflationary pressures. The central bank said that commodity price shocks caused by the occurrence of events are not usually emphasized, but this time it is not necessarily a typical case.
“The long-term high inflation risks unpleasantly pushing up medium- to long-term expectations highlight the need for the FOMC to move quickly,” Powell said.
Original title:Powell Says Fed Is Ready to Raise Rates Faster If Needed (1)(excerpt)
(Add and update Chair Powell’s remarks)