“Achieving price stability, restoring price stability, is an unconditional necessity. Something we have to do because the economy doesn’t really work for workers or for companies or for anyone without price stability. It really is the foundation of the economy,” he said.
Acknowledging the possible “pain” that reining in inflation could cause in terms of slower economic growth or higher unemployment, Powell said there were “paths” for the pace of price increases to moderate without a recession.
But if inflation doesn’t ease, Powell said the Fed won’t hesitate to raise rates until it does.
“If that means going beyond widely understood levels of ‘neutral,’ we won’t hesitate to do that,” Powell said, referring to the rate at which economic activity is neither stimulated nor constrained.
“We’ll go until we think we’re at a point where we can say ‘yeah, financial conditions are right, we see inflation coming down.'”
The Fed raised its policy rate by three-quarters of a percentage point this year and is on track to raise it again in half-percentage-point increments at its next two meetings in June and July. Interest rates on Treasuries, 30-year mortgages and other forms of debt have risen much faster in a financial tightening predicated by the Fed’s upcoming actions.
What happens next, how much more the central bank raises rates and how quickly, depends on how the economy and inflation evolve, something Powell said the central bank would assess “meeting by meeting, data read by data read.” ”.
Source: Ambito
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