Jakarta, CNBC Indonesia – Jerome Powell, president of the central bank of the United States (USA), also known as the Federal Reserve (the Fed), underlined his commitment to continue raising its key interest rate. This is still done even though US citizens don’t like it.
As known throughout 2022, the Fed raised interest rates by 425 basis points to 4.25% – 4.5%, the highest in 15 years. The increase was also the most aggressive since the 1980s.
This aggressive move has certainly increased costs for US citizens due to rising lending rates.
Powell also realized that the policies he adopted were unpopular, but to reduce inflation, which has reached a 40-year high, it was necessary to implement high interest rates.
“Restoring price stability when inflation is high requires efforts that may not be popular in the foreseeable future because they can slow down the economy,” he added, Powell said, in his speech to the Riskbank Conference on Tuesday, quoted by CNBC International.
In the Fed Dot Chart December 2022 Edition The world’s most powerful central bank indicated it would hike interest rates two more times, 50 basis points in February and 25 basis points a month ago to 5% – 5.25%.
This would be the high level of US interest rates implied by the Fed’s dot plot released last December.
The Fed also said interest rates would not be lowered until 2024. A recession was overshadowing the US.
When the cost of living is suffocating due to inflation and high lending rates, there is now the risk of layoffs (PHK) due to the recession. Obviously the citizens of the United States don’t like what the Fed is doing.
However, like a bitter but healing medicine, interest rates are also high. Bitter at first, but when inflation has come down, the economy will improve in the future and interest rates can be lowered again.
This is definitely better than the high inflation that is entrenched, people will suffer in the long run from rising prices.
“Price stability is a key cushion to a healthy economy and allows society to reap untold benefits over time,” Powell said.
Not only the citizens of the United States, even the politicians have “attacked” the Fed. Not only the recession, but also climate change.
Previously, Democratic Party politicians in the US called on the Fed to take a more active role in adopting policies related to climate change.
“The Fed is not and will not be a ‘climate policy maker,'” Powell said.
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