The Strategist

Fed chief advocates further rate hikes

02/02/2023 - 06:07

According to Fed Chairman Jerome Powell, the U.S. Federal Reserve will probably increase interest rates further to combat inflation, which is still too high despite recent slowdowns.

Federalreserve via flickr
Federalreserve via flickr
Despite the advances, he cautioned that combating inflation could slow economic development and complicate the job market, which has not yet suffered.

"Evidently, the (Open Market Committee) does not believe that a break is necessary. We still think that more increases in the target range will be necessary to ensure a sufficiently tight monetary policy environment that will drive inflation down to 2%," Powell told.

The discount rate was increased by 25 basis points by the Fed earlier on Wednesday.

"It is possible that lower inflation would need a period of below-potential growth and some deterioration in the state of the labor market. To foster the circumstances for maximum employment and stable pricing over the long term, price stability must be restored," Powell remarked.

Although he claimed that the Fed had reduced inflation by 6.5% without harming the labor market, he conceded that it was still too early to declare victory because the pace of price growth was still too rapid.