Powell, Fed Chair: "A 0.5% Rate Hike Appropriate at June and July FOMC"

Jerome Powell, Chair of the U.S. Federal Reserve (Fed)
Photo by AFP Yonhap News

[Asia Economy Reporter Byunghee Park] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), appeared on a radio broadcast on the 12th (local time) and reiterated his stance to raise the benchmark interest rate by 0.5 percentage points at the June and July Federal Open Market Committee (FOMC) meetings. Despite the April consumer price inflation rate being announced at 8.3%, higher than the market expectation of 8.1% the previous day, he emphasized again that the Fed is leaning towards a 0.5 percentage point increase rather than 0.75 percentage points.

According to Bloomberg News, Powell said on the radio program that "If the economy proceeds as expected, it would be appropriate to raise the benchmark interest rate by 0.5 percentage points at the next two FOMC meetings."

When asked about the possibility of a 0.75 percentage point increase, Powell responded that it is not being actively considered. This is the same position he expressed at the press conference following the FOMC meeting held on the 3rd and 4th. At that FOMC, the Fed decided on a so-called 'big step' by raising the benchmark interest rate by 0.5 percentage points at once for the first time in 22 years.

However, Powell added, "If the economic situation is better than expected, the Fed can prepare for less, and if the economic situation is worse than expected, the Fed will prepare for more." This leaves room for the possibility of a 0.75 percentage point increase depending on the situation.

In the interview, Powell repeatedly emphasized that price stability is the Fed's top priority.

Powell stressed that the Fed's goal is to induce a soft landing by lowering inflation to 2% while maintaining a strong labor market. However, he said that a soft landing would be a very difficult task and that some pain would be involved. He also added that a soft landing cannot be guaranteed. This is interpreted as indicating a willingness to endure some economic pain, such as rising unemployment, to bring down inflation.

Powell also said that whether a soft landing can be achieved may depend on factors beyond the Fed's control, such as geopolitical variables and supply chain disruptions.

He also expressed regret that the Fed's tightening measures should have been faster. The Fed decided to raise the benchmark interest rate by 0.25 percentage points for the first time in about three years at the March FOMC and then raised it by an additional 0.5 percentage points at the May FOMC.

Powell said, "Looking back, if we had made a perfect hindsight judgment and raised rates earlier, it would have been better." He added, "I don't know how much difference it would have made, but at that time, we made decisions quickly based on what we knew and did our best."

When asked to summarize his thoughts in five words, Powell answered, "Get inflation back under control."

Mary Daly, President of the Federal Reserve Bank of San Francisco, also supported the policy of raising the benchmark interest rate by 0.5 percentage points at the June and July FOMC meetings in an interview with Bloomberg News on the same day.

President Daly said, "It seems very reasonable to raise the benchmark interest rate by 0.5 percentage points at the June and July FOMC meetings," adding, "There is no reason to stop the 0.5 percentage point increase at this point." Regarding the 0.75 percentage point increase, Daly said it is merely speculation as a measure to control inflation and is not a priority consideration.

This content was produced with the assistance of AI translation services.