Chairman of the US Federal Reserve Jerome Powell testifies before the House Financial Services Committee on the “Annual Report on the Monetary Policy of Congress” in Washington, DC, March 3, 2022.

Jonathan Ernst AFP | Getty Images

Federal Reserve Chairman Jerome Powell underlined his determination to reduce inflation, saying on Tuesday that he would support raising interest rates until prices begin to fall to a healthy level.

“If this involves moving beyond widely understood levels of neutrality, we will not hesitate to do so,” the central banker told the Wall Street Journal in a live interview. “We will go until we feel that we are in a place where we can say that the financial conditions are in the right place, we will see that inflation is falling.

“We will go for it. There will be no hesitation about it,” he added.

Earlier this month, the Fed raised benchmark lending rates by half a percentage point, the second increase in 2022 as inflation reaches a 40-year high.

Powell said after the increase that similar steps of 50 basis points are likely to take place at subsequent meetings as long as economic conditions remain the same as they are now.

On Tuesday, he reiterated his commitment to bringing inflation closer to the Fed’s 2% target, and warned that it could be difficult and could come at the expense of 3.6% unemployment, slightly above the lowest level since the late 1960s.

“You would still have a strong labor market if unemployment rose by a few points,” he said. “I would say there are a number of likely ways for a soft, as I said, soft landing. Our job is not to thwart chances, but to try to achieve that.”

In the first quarter of 2022, the US economy shrank by 1.4% mainly due to constant supply constraints, the proliferation of the Covid omicron variant and the war in Ukraine.

However, tighter monetary policy has added to concerns about a sharper downturn and sparked aggressive sell-offs on Wall Street. In addition to 75 basis points on rising interest rates, the Fed has also suspended its monthly bond-buying program, also known as quantitative easing, and will begin losing some of its $ 9 trillion in assets starting next month.

Powell said he still hopes the Fed will be able to achieve its inflation targets without undermining the economy.

“” You would still have a strong labor market if unemployment rose by a few ticks. I would say there are a number of likely ways to have a soft, like I said, soft landing. Our job is not to thwart chances, but to try to achieve that, ”he said.

He added that “it is possible that restoring price stability may cause some pain”, but said the labor market should remain strong, with low unemployment and higher wages.

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