Federal Reserve President Jerome Powell testified to the US congress that he was inclined to propose and support a 25-basis-point rate hike in March as the Fed seeks to combat record inflation.
Powell also signaled a willingness to take further measures if inflation continued. Powell’s testimony came as $110 per barrel oil prices prompted by Russia’s invasion of Ukraine could threaten an economic recovery, putting the Fed in a quandary between stimulating the economy and battling inflation.
“The near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain,” Powell told members of Congress. “Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook.”
Powell’s monetary policy was criticized Wednesday by former US Treasury Secretary Larry Summers who believes de Fed has been late with rate hikes.
“The next recession probably has ‘mistaken monetary policy’ written all over it,” Summers told Bloomberg. “The difficulty of getting a soft landing where we both brought inflation down and we avoided recession was always very difficult. With $110 oil it’s that much more difficult.”
