Further U.S. interest rate hikes are likely to be needed despite their potential impact on jobs, according to U.S. Federal Reserve Chairman Jerome Powell. Speaking before the US Senate Banking Committee, Powell defended the continuation of the monetary tightening policy started in March 2022 by the American bank.
During the hearing, Powell was questioned by Democratic Senator Sherrod Brown, chairman of the Senate committee, about the potential loss of jobs among racial minorities and ethnic groups due to the Fed’s efforts to control inflation. Brown expressed concern that what Fed governors call “chilling” the economy, ordinary people in his constituency call layoffs.
In response, Powell acknowledged that working families suffer the most directly and quickly from inflation. However, he stated that Fed officials believe it will be appropriate to raise rates again this year, and possibly twice, assuming the economy behaves as expected.
Powell also emphasized that the central bank still has a long way to go to bring inflation back to the 2% target. He provided insight into the Fed’s approach for the coming months, stating that they moved quickly in previous meetings but are now close to their desired destination. Powell emphasized the need to move at a careful pace and not do more than necessary.
The Fed opted for the status quo on rates this month, but the overwhelming majority of the Federal Open Market Committee members believe that more rate hikes are coming. Powell stated that they want to proceed at a pace that allows them to assess new economic data.
The remarks by Powell come as the Fed continues to navigate the balance between controlling inflation and supporting employment. The decision to raise interest rates can have a significant impact on the economy and job market, making it a delicate balancing act for the central bank.
(Reporting by Howard Schneider; French version by Claude Chendjou, edited by Kate Entringer)
How does the Federal Reserve plan to strike a balance between controlling inflation and supporting employment as it proceeds with future interest rate hikes
U.S. Federal Reserve Chairman Jerome Powell has defended the need for further interest rate hikes, despite concerns about their impact on jobs. Speaking at a hearing before the U.S. Senate Banking Committee, Powell stated that the continuation of the monetary tightening policy was necessary to control inflation, even if it meant potential job losses for racial minorities and ethnic groups.
Powell’s remarks came in response to questions from Democratic Senator Sherrod Brown, who raised concerns about the negative consequences of the Fed’s efforts to curb inflation. Brown highlighted that what the Fed referred to as “chilling” the economy, ordinary people in his constituency called layoffs. Powell acknowledged the direct and immediate impact of inflation on working families but reiterated the belief among Fed officials that raising rates again this year, possibly twice, was necessary.
While Powell emphasized the central bank’s commitment to bringing inflation back to its 2% target, he also stressed the need for a cautious approach. He revealed that the Fed had moved swiftly in previous meetings but was now nearing its desired destination. Powell emphasized the importance of proceeding at a careful pace and avoiding excessive measures.
Despite maintaining the current interest rates this month, the majority of the Federal Open Market Committee members anticipate future rate hikes. Powell stated that they would proceed at a pace that allowed for the assessment of new economic data.
The remarks by Powell highlight the delicate balancing act faced by the Fed in managing inflation and employment. The decision to raise interest rates can have a significant impact on the economy and the job market. The central bank aims to strike a balance between controlling inflation and supporting employment as it navigates the path forward.
(Reporting by Howard Schneider; French version by Claude Chendjou, edited by Kate Entringer)
It’s concerning to see Jerome Powell advocating for further interest rate hikes when there is already a potential negative impact on employment. It’s crucial to prioritize job growth alongside monetary policy to ensure a stable and thriving economy.
While Jerome Powell’s defense of continued interest rate hikes may seem contradictory to job growth, it is important to consider the long-term effects. Maintaining a healthy economy and preventing excessive inflation are crucial for sustained job creation in the future.