Powell: The Fed’s fight against inflation might cause ‘pain’ in the United States
As the Federal Reserve raises interest rates to combat inflation, Jerome Powell cautioned that the United States may experience “some pain.”
Even if it means risking a worse economic slowdown, Powell said the Fed would keep raising interest rates until inflation starts to decline and the causes driving prices higher dissipate.
Powell made it plain that the Fed would not stop battling inflation until it returned to the bank’s 2% annual objective, even if that meant hiking rates to levels that would restrain the economy.
“Restoring pricing stability is an absolute need – it’s something we must do,” Powell stated.
As pandemic-related pressures faded later in the year, Powell and the Fed, along with a slew of analysts, predicted that inflation would decline.
Powell said the Fed’s assessment of the economy “shifted fairly profoundly” in October when economic data indicated inflation was accelerating, labor demand was increasing, and job growth was significantly greater than previously reported.
“Raising rates sooner would have undoubtedly been preferable.” We were looking at some really poor job reports. “We were looking at reports of falling inflation,” Powell explained.
“We didn’t hesitate from there when it ended and the statistics started pointing toward a stronger economy with more inflationary pressures [and] higher wage pressures.”
A rising number of analysts and former Fed officials believe the bank waited too long to start raising rates without harming the economy.