The president of the
In what analysts interpreted as Powell’s toughest statements to date, the official said during a live interview hosted by The Wall Street Journal that “the Fed will continue to push until inflation pulls back in a clear and convincing way.”
Following the latest upward revision and recent comments from Fed officials and Powell himself, the Fed is expected to make further 50-point hikes during the next monetary meetings in June and July, although the range will depend especially on what happens in the short term with inflation, the Fed chairman explained.
“If the Fed does not see signs of a decline in inflationary pressures, it will consider being more aggressive,” warned Powell, and, if not, “a slower pace of rate hikes will be considered”.
During the dialogue, the central bank president emphasized the need to curb the problem and described price stability as “the foundation of the economy”, according to Bloomberg.
In this sense, Powell acknowledged that the risks of a tough monetary policy -including a “slight increase” in the unemployment rate- are costs worth paying in order to curb the rise in prices.
So far, the Fed’s stance is to increase the rate until it reaches a “neutral” level by the end of the year (one that will drive neither a contraction nor an expansion of the economy), which is estimated at 2.5 percent, although Powell did not rule out, if necessary, “going beyond the levels that are considered neutral”, if inflation does not calm down.
In that sense, one data that the FED follows closely to evaluate the state of the economy is the unemployment rate, which in April stood at 3.6 percent.
While there are still a million jobs short of the pre-pandemic levels of
In April, the Consumer Price Index rose 8.3 percent year-over-year, according to
Although March is considered to be a peak, analysts and economists believe that restrictions due to the flare-ups in