Federal Reserve Chairman Jerome Powell promised to act forcefully against inflation in prepared remarks for the National Association for Business Economics. After last week’s mild 0.25% rate cut Powell has joined other Federal Reserve governors in foreshadowing steeper rate cuts.
“We will take the necessary steps to ensure a return to price stability,” he said. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so.”
US inflation is at its highest level since 1982 at 7.9%, driven by soaring energy prices. The next adjustment of interest rates will take place in May where the Federal Open Market Committee (FOMC) will most likely decide to rates by either 0.25% or 0.5%. The Fed Chair admitted that inflation had been “widely underestimated.”
“In normal times, when employment and inflation are close to our objectives, monetary policy would look through a brief burst of inflation associated with commodity price shocks,” he said. “However, the risk is rising that an extended period of high inflation could push longer-term expectations uncomfortably higher, which underscores the need for the Committee to move expeditiously as I have described.”
Other Fed Officials such as inflation hawk, St. Louis Federal Reserve Bank Governor James Bullard, have also advocated sharper measures against inflation since the last FOMC meeting.