The Federal Reserve could raise interest rates HIGHER and faster than expected to combat inflation and Biden’s fiscal policy is NOT to blame for rising prices, Chairman Jerome Powell tells senators.
- Powell told the Banking Committee that “the final level of interest rates is likely to be higher than previously anticipated.”
- The Fed’s target range for interest rates currently stands at 4.5 to 4.75 percent.
The Federal Reserve could keep raising rates if inflation doesn’t start to fall faster and the economy doesn’t cool, Chairman Jerome Powell told senators on the Banking Committee Tuesday.
He also warned that rate hikes could happen more frequently and claimed that congressional spending had little to do with price rises.
In response to a line of questioning from Senator John Kennedy, R-Los Angeles, about what Congress could do to help fight inflation, Powell said:I don’t think so tax policy right now it’s a big factor driving inflation right now.’
It’s a notable comment since the Fed chair generally tries to avoid commenting on fiscal policy.
Powell told the committee “that the final level of interest rates is likely to be higher than previously anticipated” and “if the totality of the data indicated that more rapid tightening is warranted, we would be prepared to increase the pace of rate hikes.” .’
The Fed’s target range for interest rates is currently between 4.5 and 4.75 percent. Prices in January rose 6.4 percent from a year earlier and 0.5 percent from a month earlier, according to the Consumer Price Index. That was slightly lower than the December numbers, but still much higher than the Fed’s target.
The Federal Reserve could keep raising rates if inflation doesn’t start to fall faster and the economy doesn’t cool, Chairman Jerome Powell told senators on the Banking Committee Tuesday.
The central bank raised its reference rate by a quarter of a point in early February after imposing a half-point hike in December and four three-quarter hikes before that.
Over the past year, the central bank has raised its key rate, which affects many consumer and business loans, eight times.
Economists expected the Fed to raise rates by 0.25 percent, or 25 basis points, when it meets on March 21-22. Powell’s comments now suggest the increase could be as much as 50 basis points.
Banking Committee Chairman Sen. Sherrod Brown criticized the Fed’s persistent rate hikes. “This is a complex problem and interest rates are also unique and compelling,” said Brown, D-Ohio.
Powell also warned that rate increases could happen more frequently.
“Raising interest rates certainly won’t stop big corporations from exploiting all these crises to raise prices far beyond the increase in their costs,” he added, pointing to other factors contributing to inflation, such as Russia’s war on Ukraine. .
Senator Tim Scott, the top Republican on the committee, responded that the Fed would not have to institute these increases if Congress had kept its federal spending in check.
“We will continue to make our decisions on a meeting-by-meeting basis,” Powell said. “Although inflation has been moderating in recent months, the process of bringing inflation down to 2% has a long way to go and is likely to be bumpy.”