US Federal Reserve Chairman Jerome Powell warned that the process of cracking down on inflation would be “somewhat painful.”
The US Federal Reserve again raised its key interest rate in the US on Wednesday, indicating that there will be more hikes in the future amid a tough environment that raises fears of a recession.
This is the third consecutive 0.75 percentage point increase by the Federal Open Market Committee, which is tasked with setting Federal Reserve policy, and as part of ongoing efforts to bring down inflation, which has reached its highest level in 40 years.
The interest rate after the last increase reached 3.0 and 3.25 percent, and the Open Market Committee said it “expects further increases … to be appropriate.”
Rising prices are putting pressure on American families and businesses and have become a political burden for President Joe Biden, who faces the midterm congressional elections in early November.
But the contraction of the world’s largest economy will be an even more devastating blow to Biden, to the credibility of the Federal Reserve and around the world.
Federal Reserve Chairman Jerome Powell has made it clear that officials will continue to act aggressively to calm the economy and avoid a repeat of the 1970s and early 1980s, when inflation last ran out of control in the United States.
Tight action was needed in the midst of a recession to bring prices down, and the Federal Reserve is not ready to give up its credibility to fight and beat inflation.
In response to criticism from the Federal Reserve, Powell said the US central bank is committed to raising interest rates and keeping them high until inflation subsides, warning against taking the opposite path in the short term.
“Historical data strongly caution against premature easing,” Powell told reporters.
He stressed that the Fed will continue “as long as the task is not completed,” although at some point it would be appropriate to slow down the pace of interest rate hikes, as dictated by indicators and data.
He acknowledged that it would take a period of slow growth and high unemployment to bring inflation down, saying: “We have to put inflation behind us. I wish there was a painless way to do this, but there isn’t.”
He pointed out that continued inflation would be more painful, especially for the least able to endure.
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