Powell "Strongly Committed to Curbing Inflation"... On Recession Questions, "There Is a Possibility"

by Cho Seulkina

Published 23 Jun.2022 04:41(KST)

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] "I strongly promise to control inflation."

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), appeared before the Senate Banking Committee on the 22nd (local time) and stated, "We will do our best to bring inflation back to our target of 2%," adding, "We are moving swiftly to achieve this."

Chairman Powell acknowledged, "The Fed recognizes that inflation is currently high," and emphasized, "We will do our best to stabilize it using the tools we have." He said, "I believe it is appropriate to continue raising interest rates," and added, "The Fed's balance sheet will also shrink significantly." Furthermore, he said, "We will find out this month whether inflation is decreasing and observe the pace of its decline."

Chairman Powell stated, "Price stability is really important for the economy," and predicted, "Raising interest rates is what I can do. By the end of 2022, interest rates will be around 3 to 3.5%." He also assessed that the current U.S. economy has enough strength to withstand interest rate hikes.

However, when asked whether he sees the possibility that interest rate hikes could lead to a recession, Powell responded, "There is a possibility." He said, "It is not the outcome we intend, but it is certainly possible," and evaluated, "Honestly, the events that have occurred worldwide in recent months have made it difficult to achieve our goals, namely 2% inflation and a strong labor market."

Additionally, he confirmed the policy to continue raising interest rates despite concerns about a recession, stating, "In fact, current interest rates are low. What we want is to raise them to a neutral rate." He said, "We will raise interest rates based on data," and added that the magnitude of rate hikes will be determined by when inflation begins to ease.

The Fed implemented a giant step of raising interest rates by 0.75 percentage points at this month's Federal Open Market Committee (FOMC) regular meeting. This was the first giant step in 28 years since 1994. At the press conference immediately after, Chairman Powell indicated the possibility of a 0.5 to 0.75 percentage point rate hike at the July FOMC, saying, "Continued rate hikes are appropriate."