Recently, Federal Reserve Chairman Jerome Powell proclaimed that the nation’s central bank remained determine to keep increasing interest rates until clear indicators surface suggesting that rapidly spiraling inflation has started to abate.
Powell’s remarks illuminate a sudden aggression in light of years of near-zero interest rates, which commenced during the Obama administration and continued until the spring of this year.
Higher interest rates will entail higher borrowing costs for businesses and consumers, typically cooling demand and slowing down economic activity. The Fed has previously been hesitant to raise rates due to fears of a recession; however, rapidly escalating prices have elevated pressure on the central bank to adopt a more aggressive stance towards inflation.
In remarks at a Wall Street Journal conference, Powell declared that the Federal Reserve needs to see “clear and convincing evidence” that inflationary pressures are weakening.
“And if we don’t see that,” Powell continued threateningly, “then we will have to consider moving more aggressively.”
By “moving more aggressively,” Powell is alluding to the likelihood of the central bank increasing rates even more quickly than previously projected.
The latest remarks from the Federal Reserve chairman suggest that the nation’s central bank may be undergoing the most rapid tightening of credit in well over three decades.
Earlier in the month, the Fed increased its key rate by half a percentage point, which is twice as large as the usual increase, a first since 2000.
The central bank may also increase inflation by an additional half a percentage point at its June and July meetings, representing at least two more hikes over the course of the summer.
Over the past six weeks, the stock market has experienced precipitous losses, with the S&P 500 shedding at least 15 percent from its all-time high in January. If the S&P 500 slips by 20 percent or more, the stock market will officially enter bear territory.
However, Powell did not demonstrate any visible concern over the markets, given the increasingly urgent need to tame prices. The chairman also acknowledged that the Fed would “[move] to a slower pace” if inflation starts to abate.
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