The Fed will set policy based on 'actual progress' resolving supply issues, rather than models and forecasts, Chair Jerome Powell says. Put differently: The rate hikes will continue until supply constraints improve.
Federal Reserve Chairman Jerome Powell at a 2019 NABE conference. Photo: Daniel Brenner/Bloomberg via Getty Images
The Fed will "will take the necessary steps to ensure a return to price stability," Powell said in prepared remarks for a speech to the National Association for Business Economics in Washington on Monday. The steps could include raising rates half a percent at a time, rather than the customary quarter-point.
In Fed officials' forecasts, he said, "growth slows as the very fast growth from the early stages of reopening fades, the effects of fiscal support wane, and monetary policy accommodation is removed."History is littered with examples of the Fed causing a recession in its attempts to rein in inflation. But Powell argued that there are better historical examples to follow.
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