WASHINGTON, United States—The US central bank is prepared to raise interest rates by bigger steps than the quarter-point hike announced last week if that is what’s needed to contain “much too high” inflation, Federal Reserve Chair Jerome Powell said Monday.
Consumer prices in the world’s largest economy have surged to the highest seen in four decades, and the Fed last week raised the benchmark lending rate for the first time since the COVID-19 pandemic began to try to tamp down inflation pressures.
“If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so,” Powell said in a speech to an economics conference.
Inflation was already rising before the Russian invasion of Ukraine added to new price pressures and supply chain impediments that could spill over to the US economy, he told the National Association for Business Economics.
“There is an obvious need to move expeditiously” to remove the stimulus the Fed provided to the American economy during the pandemic, but Powell said central bankers are prepared to go beyond “neutral” and tighten policy if needed to achieve their goal.
Last week’s rate hike was billed as the first in a series, and several policymakers have expressed willingness—or the need—to move in bigger steps.
St Louis Fed Bank President James Bullard dissented in the vote at last week’s meeting of the policy-setting Federal Open Market Committee, because he wanted a half-point increase as the first move.
Atlanta Fed Bank President Raphael Bostic, who spoke to the NABE conference early Monday, said he will “adapt” his views to the data, even if it means raising a full point. AFP
“I’m comfortable with more aggressive movements if that’s what the data and the evidence suggests is appropriate,” said Bostic, who unlike Bullard is not currently a voting member of the FOMC.
“I’m going to be very, very open in terms of my approach… it could at some point be move nothing. It could be 25; it could be 50; it could be 75; it could be one,” Bostic told reporters.
Like Bostic, Powell said the key issue is containing prices, and he dismissed the idea of raising the Fed’s inflation target to three percent from two percent.
