The Federal Reserve has shown a deep commitment to tackle the highest inflation in more than 40 years, largely even if their uncontrolled supply turmoil helped boost prices sharply.
Federal Reserve Chair Jerome H. Powell called for the central bank’s commitment to “unconditionally” manage price increases while testifying in front of the House of Representatives on Thursday. His colleague, Fed Governor Michelle Bowman, supported a three-quarter point increase in July and a 0.5 point increase at subsequent “next few” meetings in an unscheduled speech. I have announced that I will do it. Central banks are trying to keep costs down.
“These actions carry risks,” Bowman said. “But in my view, our greatest responsibility is to reduce inflation.”
The Fed oversees the economy of high growth and consumer spending. At the same time, shipping problems, factory closures in Asia, and the war in Ukraine have restricted the supply of manufactured goods, gas, and food, and the domestic labor shortage has led to the number of flights that airlines can offer and the food that restaurants can offer. Was restricted. Prices soared as strong demand clashed with shrinking supply.
The Fed’s main policy tool for raising interest rates can hardly improve limited supply, but it helps cool demand. Higher mortgage and credit card rates can curb home purchases and personal consumption, and higher business loans can slow business expansion and employment.
The Fed has already begun raising interest rates and is currently set in the range of 1.50 to 1.75 percent.
While countries around the world are fighting supply chain problems that are spurring rapid inflation, Fed officials have emphasized that the United States also has rapid growth and a strong job market. increase. It may give room to try to ease business activities and lower price increases without causing a complete recession.
“We actually have a very strong economy,” Powell told lawmakers Thursday when asked about the global situation. “Much of our inflation is due to demand, and we have tools that work in response to demand.”
However, Powell also found that while central banks could design soft landings, it would be a challenge. With interest rates slowing, shocks shaking the economy and continuing to curb supply, it will be difficult to curb price increases while maintaining a strong economy and job market.
“We have work to do and it’s very important to do it,” Powell said. “The only way we can get back to low inflation is to try to rebalance supply and demand.”
