Powell Reflects on Anti-Inflation Policies, The Federal Reserve (FED) May Intensify Interest Rate Hikes

The Chairman of the Federal Reserve (FED), Jerome Powell, recently reflected on the inflation policy. In an interview with a radio station, he admitted that the Federal Reserve (FED) may have acted slowly in combating inflation and stated that earlier interest rate hikes might have been more effective. However, Powell also emphasized that the decisions at that time were made based on real-time information and that the Federal Reserve (FED) has made its best efforts to address inflation.

These remarks reflect a change in Powell's attitude towards his previous stance on the "transitory" nature of inflation. In the face of persistently high inflationary pressures, the Federal Reserve (FED) has had to adjust its policy stance. Recently, the U.S. Senate confirmed Powell's reappointment as Chair of the Federal Reserve (FED), but due to voters suffering from the impact of soaring prices, he has lost some support from senators.

For most of last year, the Federal Reserve (FED) believed that rising inflation was a temporary phenomenon, primarily concentrated in areas affected by the pandemic and supply chain disruptions. However, over time, the impact of inflation has continued to broaden, permeating various industries and placing enormous pressure on the public in terms of food, energy, and housing.

To address this situation, the Federal Reserve (FED) abandoned the "transitory" narrative at the end of last year and has been working to convey to the public that they are taking the inflation issue seriously. Powell even held a special press conference last week to communicate directly with the American public, emphasizing that the primary task of the Federal Reserve (FED) is to prevent high inflation from becoming entrenched in the economy.

The challenge currently facing The Federal Reserve (FED) is how to achieve a "soft landing" for the economy while controlling inflation. They primarily aim to curb consumer spending and business investment by raising interest rates, thereby reducing inflationary pressures. However, raising interest rates too quickly or too high may hinder economic growth and increase the unemployment rate.

In previous statements, Powell had indicated that he would not consider a one-time rate hike of 75 basis points, but rather preferred to raise rates by 50 basis points at each meeting over the next few months. However, in a recent interview, he seemed to leave room for a larger rate hike. Powell stated that if economic performance meets expectations, a 50 basis point increase at the next two meetings would be appropriate. But if economic conditions are better or worse than expected, The Federal Reserve (FED) will adjust the rate hike accordingly.

When asked whether it is possible to raise interest rates by 75 basis points at once, Powell did not answer directly but emphasized that the Federal Reserve will flexibly adjust its policies based on future data and changes in the economic outlook. This indicates that the Federal Reserve maintains a certain degree of flexibility in addressing inflation issues and will make corresponding decisions based on actual economic conditions.