Powell: "Big Step More Appropriate than Giant Step in June and July" (Summary)

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

[Asia Economy Reporter Park Byung-hee] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), appeared on a public radio broadcast on the 12th (local time) and reiterated his stance to raise the benchmark interest rate by 0.5 percentage points at both 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 day before, he emphasized again that he favors a "big step" increase of 0.5 percentage points rather than a "giant step" increase of 0.75 percentage points. He also expressed some regret, saying it might have been better to raise rates more quickly.

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

When asked about the possibility of a 0.75 percentage point increase, Powell responded that he is not actively considering it. 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 "big step" for the first time in 22 years. Although voices calling for a "giant step" have grown louder as U.S. consumer inflation hits the highest level in over 40 years, Powell still appears to keep some distance from that option.

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 a "giant step" depending on circumstances.

In the interview, Powell repeatedly emphasized that price stability is the Fed's top priority. He stated that the Fed's goal is to guide a soft landing by lowering inflation to 2% while maintaining a strong labor market. However, Powell said that a soft landing would be a very difficult task and would involve some pain. He also added that a soft landing cannot be guaranteed. This is interpreted as his willingness to accept 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 expressed regret that the Fed's tightening measures should have been faster. Powell said, "If we could go back and make a perfect hindsight judgment and had raised rates earlier, it would have been better." However, he added, "At the 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."

The U.S. Senate confirmed Powell's reappointment on the same day. The Senate held a plenary session to vote on Powell's second term, and the agenda was passed with an overwhelming vote of 80 in favor and 19 against.

Powell served as Deputy Secretary and Secretary of the Treasury during the George H.W. Bush administration and was appointed as a Fed board member by former President Barack Obama. He has been serving as Fed Chairman since February 2018, appointed by former President Donald Trump. After becoming Fed Chairman, he often clashed with Trump due to Trump's explicit demands for interest rate cuts.

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