Chair Jerome Powell said Monday that the Federal Reserve would raise its benchmark short-term interest rate faster than expected.
Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee hearing, on March 3, 2022 on Capitol Hill in Washington. Powell said Monday that the Federal Reserve would raise its benchmark short-term interest rate faster than expected, and high enough to restrain growth and hiring, if it decides this would be necessary to slow rampaging inflation.
He added, too, that the policymakers could go so far as to send rates into “restrictive” territory that would slow economic growth and possibly raise the unemployment rate, if needed to tame high inflation. Powell cautioned Monday that those projections of future interest rates and inflation “can become outdated quickly at times like these, when events are developing rapidly.”
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He suggested that higher rates from the Fed could slow consumer spending enough to reduce that outsize demand for workers, which would, in turn, reduce wage growth to a level that wouldn’t boost inflation. Bostic also said he expects the Fed to raise rates a total of six times this year, and twice more in 2023. That is a more dovish approach than most of his colleagues. But he emphasized that this was mostly because of the extreme uncertainty currently surrounding the economy. If more rate hikes were necessary to slow inflation, he would support them, he said.
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