HomeEconomyUS: War on inflation is far from over, Fed warns

US: War on inflation is far from over, Fed warns

Jerome Powell highlights that further increases in key rates are expected.

The US Federal Reserve’s fight to bring inflation to the 2% target
has “a long way to go,” the president of the US central bank said on Wednesday.

“Inflation has moderated a bit since the middle of last year,” Jerome Powell said in remarks prepared for his hearing before the House Financial Services Committee.

High inflationary pressures

“Inflationary pressures remain elevated and the process of bringing inflation back to 2% is far from complete,” Jerome Powell said, noting that although the Fed opted for the status quo at its last meeting, “almost all” members of the Fed committee expect further rate hikes to take place. be appropriate by the end of 2023.

In May, inflation reached 4% in a year after 4.9% in April.

These rate hikes, which encourage commercial banks to offer higher interest rates for loans to households and businesses, are intended to slow down economic activity, to ease price pressures and curb inflation.

Thus, “to determine” how much more they will need to tighten monetary policy to achieve this objective, “we will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, as well as the y financial developments,” he added.

But “reducing inflation will likely require a period of below-trend growth,” warned Jerome Powell.

The next Fed meeting will be on July 25-26.

Author: CO with Reuters and AFP
Source: BFM TV

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