Powell “Strongly Committed” to Hiking Interest Rates
Federal Reserve Chair Jerome Powell testified in Congress on Wednesday that the central bank remains determined to keep hiking interest rates high enough to cool red-hot inflation, acknowledging that recession is “certainly a possibility” but insisting the American economy is robust enough to withstand tighter financial conditions.With decades-high inflation running “well above” the Fed’s longer-run target of around 2 percent, Powell told the Senate Banking Committee that restrictive monetary policies are needed to quell price pressures and that “you will see continued expeditious progress toward higher rates.”
Finding itself behind the curve on inflation that has risen higher and stayed elevated longer than it previously expected, the Fed recently raised the benchmark Federal Funds rate by 75 basis points, the biggest jump since 1994. Markets are now pricing in a 91 percent chance of another 0.75 percentage point hike at the Fed’s next policy meeting in July.
Inflation ‘Surprised to the Upside’
In his testimony, Powell told lawmakers that the pace of future rate hikes will depend on how quickly inflation comes down as the monetary screws are tightened, with assessments made on a “meeting by meeting” basis.
“Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble …