Federal Reserve Chairman Jerome Powell said a half-percentage point interest rate hike is likely as soon as next month, as the central bank needs to move faster to get inflation under control.
“It is appropriate in my view to be moving a little more quickly”, Powell said during an International Monetary Fund panel. “I would say 50 basis points will be on the table for the May meeting.”
Powell’s statements confirm the market expectations on the Fed doing more than raise the usual 25 basis point, since a stronger push is needed to tame the highest inflation recorded in more than 40 years.
“It’s absolutely essential to restore price stability. Economies don’t work without price stability,” he said.
In March, the central bank raised interest rates by a quarter-percentage point to a range of 0.25% to 0.5% in its first hike since 2018.
The pandemic and the war in Ukraine keep pushing up energy and food prices fueling worldwide inflation. The Fed expects the geopolitical situation to still put upward pressure on U.S. inflation.
Powell said the Fed’s goal is to use all its tools to get demand and supply back in synch.
“I don’t think you’ll hear anyone at the Fed say that’s going to be straightforward or easy. It’s going to be very challenging. We’re going to do our best to accomplish that,” Powell said.