The Fed raised its benchmark overnight rate by three-quarters of a percentage point on Wednesday in an effort to cool the sharpest bout of inflation since the 1980s, with Chairman Jerome Powell saying another “unusually large” hike. could be appropriate at your next meeting if price pressures haven’t eased enough.
“Inflation remains elevated, reflecting pandemic-related supply and demand imbalances, rising food and energy prices, and broader price pressures,” the Federal Committee on Open Market (FOMC), in charge of setting rates, by raising them to a range between 2.25% and 2.50% in a unanimous vote.
The FOMC added that it remains “very vigilant” to inflation risks, a point Powell emphasized during his remarks at the post-meeting press conference, saying it was “essential” to bring down inflation.
Federal Reserve officials are “well aware” of the difficulties inflation imposes on American households, particularly those with limited means, Powell said, and will not back down until presented with “compelling evidence.” that it is going down.
“Restoring price stability is something we have to do,” he added. “There is no option not to do it.”
But while employment growth has remained “robust,” “recent spending and output indicators have softened,” the statement added.
Still, Powell insisted the economy has underlying strength.
“I don’t think the United States is currently in a recession,” he said, noting that unemployment remains near a half-century low, and there is solid wage growth and job growth. “It wouldn’t make sense for the United States to be in a recession.”
Regardless, bringing inflation down to target “is likely to imply a period of below-trend economic growth, and some weakening of labor market conditions, but these outcomes are likely necessary to restore price stability and set the foundations for maximum employment and long-term price stability.
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