Fed president: "If we need to raise rates more, we'll do it."Federal Reserve President Jerome Powell told Congress on Tuesday that if inflation does not fall, the central bank will be more daring in raising lending rates in the short term. .
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| Fed president: "If we need to raise rates more, we'll do it." |
“If we see that inflation continues to rise at a higher level than expected and if we need to raise the rate more often, we will do so,” Powell said at a hearing of the Congressional Committee. elder.
Powell faces the Senate for his nomination. President Joe Biden announced in November that he was approaching Powell for a second time at the central bank, as current Fed Gov. Lyle Brainard heard of his confirmation as vice president.
The stakes are high for the Federal Reserve this year, as inflationary pressures have shown inflation to rise by nearly 7% annually.
The Fed has spent the past year trying to figure out how much of these price increases are the result of increased demand (allowing producers to raise prices) or supply restrictions (which increase inflation). production of suffid disorders).
Powell said they both seem to be contributing to inflation, but the Fed president acknowledged that demand is "very strong" right now.
Federal Reserve President Jerome Powell spoke during a Senate Banking Committee hearing on Capitol Hill in Washington on Tuesday, November 30, 2021. In a note at the congressional hearing, Powell said inflation is affecting “American families”. Tuesday 11 January 2022 where he is sure to face tough questions about it. (Photo AP/Andrew Harnick, File)
Federal Reserve President Jerome Powell spoke during a Senate Banking Committee hearing on Capitol Hill in Washington on Tuesday, November 30, 2021. In a note at the congressional hearing, Powell said inflation is affecting “American families”. Tuesday 11 January 2022 where he is sure to face tough questions about it. (Photo AP/Andrew Harnick, File)
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The strongest instrument the Fed holds is the fixed interest rate, which the central bank sets at zero until the depth of the crisis. Higher interest rates can meet higher demand by making loans more expensive. But higher loan costs may not solve many supply problems, such as disruptions in shipments to ports around the world.
"We can influence the demand side, we can't influence the supply side. But it's a combination of the two."
It's time to go back
Fed observers said the central bank was moving quickly in its efforts to halt its soft monetary policy of recession.
In addition to keeping interest rates at zero, the central bank has raised millions of dollars in reserves and collateral. A program called quantitative easing is designed as a tool to send a message to the market with the intention of keeping the policy “adaptable”.
In the face of rising inflation, the Fed plans to end this program sooner than expected (with current plans to cut all purchases in March). The Fed will try to raise interest rates.
For the Federal Reserve, which also prioritizes the health of the labor market, the continued monthly employment growth has given politicians confidence that they can tighten policy without disrupting. the economy.
"Now is the time to start moving away from emergency measures to more normal levels. They should not have a negative impact on the labor market."
Powell is expected to go through the ratification process, which includes an initial review by the Senate Banking Committee and then a full election by 100 senators.
Powell helped secure the support of both parties to many administrations. Powell is a United Republic, and was confirmed as a member of the Federal Reserve Board of Government during the F
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