Fed President: Raise interest rates, tighten policies more to control inflation


Fed President: Raise interest rates, tighten policies more to control inflation

Chairman of the US Federal Reserve (Fed), Mr. Jerome Powell assessed that the “health” of the US economy has returned to good and needs to apply tighter monetary policy.

Mr. Jerome Powell, Chairman of the US Federal Reserve (Fed). Photo: AFP

At a hearing before the US Senate Banking, Housing and Urban Affairs Committee on January 11 (US time), Fed Chairman Jerome Powell said he expected a series of rate hikes this year, along with cuts to the special support that the Fed launched during the pandemic.

“This year… if everything goes as expected, we will normalize policy, which means we will end our asset purchases in March, which means we will raise rates within whole year,” the Fed chairman told the Banking, Housing and Urban Affairs Committee. “At some point, perhaps later this year, we’ll start to shrink our balance sheet, and that’s just the path to policy normalization,” Mr. Powell added.

Several Republican senators have expressed concern about whether the Fed is moving too far from its stated goals of price stability, full employment, and banking supervision. However, in the end, the Fed Chairman still received support from the entire Senate.

Questions at the hearing focused on the fact that US inflation is at a nearly 40-year high. For much of 2021, the Fed has dismissed the high inflation rate as “temporary”. However, by the end of 2021, the Fed has looked back and is expected to conduct 3 or 4 rate hikes this year with a quarterly increase of 0.25 percentage points. The increase in interest rates is expected to help the US cope with high inflation by slowing down the rapidly moving money in the US economy after the Fed and US Congress “joined hands” to launch economic stimulus packages. economy with a total value of more than 10 trillion USD.

“If we see inflation stay high for longer than expected, we will have to raise rates more over time,” the Fed chair said, adding that the agency “will use the tools themselves to cope with inflation”.