The United States Federal Reserve, the apex banking institution in the country has been battling inflation growth since the emergence of the coronavirus pandemic, and per a recent remark by Chairman Jerome Powell, the fight against inflation is not waning anytime soon.
Addressing the Senate Banking Committee, Powell said that the central bank is “strongly committed” to bringing down inflation, and its major avenue to do this is through tested monetary tools.
“At the Fed, we understand the hardship high inflation is causing. We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so,” the Fed chief said. “We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses.”
The inflation growth in the United States is becoming extremely worrisome with the Consumer Price Index (CPI) topping 8.6% in May, the highest level since December 1981. The Federal Reserve’s Open Market Committee (FOMC) in its last three meetings has raised the interest rate to 1.5% with the last coming off as 75 basis points, the biggest hike since 1994.
While these rate hikes may be termed excessive, Jerome Powell said the United States economy is healthy enough to withstand the impacts across the board. Powell said the fight against inflation will be continuous until there is compelling evidence that the inflation level is down.
“Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2%,” Powell said. “We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”
Federal Reserve Needs Plan B in Its Inflation Fight
While the observable inflationary growth was ignited during the periods of global supply chain halt during the Covid-19 era, the ongoing war in Ukraine, as well as the lockdowns in China, are arguably contributing to the hike in commodities prices.
The Federal Reserve may need a plan B should its current monetary policies fail to address the inflation and push the economy back into recession. Senator Elizabeth Warren (D-Mass) warned Chairman Powell to be watchful as the continued rate hikes could “tip this economy into recession” without stopping inflation.
“You know what’s worse than high inflation and low unemployment is high inflation and a recession with millions of people out of work, and I hope you’ll reconsider that before you drive the economy off a cliff,” she said.
Powell acknowledged that while it is possible that the US economy fall into recession as noted, it will not be the intended outcome.
“It’s certainly a possibility,” he said. “It’s not our intended outcome at all, but it’s certainly a possibility, and frankly the events of the last few months around the world have made it more difficult for us to achieve what we want, which is 2% inflation and still a strong labor market.”
Powell was, however, realistic in his projections as he noted the difficulty in bringing inflation down without corresponding adverse effects on the economy.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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