Federal Reserve Chair Jerome Powell said he will back interest rate increases until prices start falling back toward the 2% percent target.
“If that involves moving past broadly understood levels of neutral we won’t hesitate to do that,” Powell said in a Wall Street Journal event. “We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down”.
Earlier this month the Fed raised the benchmark interest rates by half a percentage point. This was the central bank’s second increase of the year as inflation is hitting levels not seen in almost 40 years.
The Fed’s commitment to getting inflation closer to the 2% target is unchanged. Powell however warned this won’t be easy.
“No one should doubt our resolve in doing that… What we need to see is inflation coming down in a clear and convincing way,” he said.
After earlier this week former Fed Chair Ben Bernanke criticized Powell’s Fed for acting too slowly, Powel said it “would have been better to raise rates earlier”.
The U.S. economy saw growth contracted 1.4% in the first quarter of 2022, due largely to ongoing supply side constraints and volatility in markets affected by the war in Ukraine.