Federal Reserve Chairman Jerome Powell held a press conference after the Fed increased its policy rate by 75 basis points.
Stating that they are aware of the difficulty caused by high inflation, Powell said, “We place great importance on reducing inflation and we are moving quickly to do so.”
Stressing that they have the determination to restore price stability, Powell noted that the US economy has gone through a lot in the last two and a half years and has proven to be resilient.
“COMMITTEE ESTIMATES CONTINUING INCREASE IN THIS RATE WILL BE APPROPRIATE”
Pointing out that the labor market is extremely tight and inflation is very high, Powell said that it is important to reduce inflation for the continuity of a strong labor market that benefits everyone.
“The Federal Open Market Committee (FOMC) increased the policy rate by 75 basis points and estimates that continued increases in this rate will be appropriate,” Powell said.
Fed Chairman Powell stated that the process of significantly reducing the size of the bank’s balance sheet continues.
“TIGHTENING FINANCIAL CONDITIONS MUST CONTINUE TO SLOW GROWTH”
Reminding that general economic activity decreased in the first quarter, Powell said that the latest indicators show that real gross domestic product (GDP) growth accelerated in this quarter, with consumption expenditures remaining strong.
“The tightening in financial conditions we’ve seen in recent months should continue to slow growth and help better balance demand with supply,” Powell said.
Stating that inflation continues to stay well above the long-term 2 percent target, Powell said that aggregate demand is strong, supply constraints are larger and last longer than expected, and price pressures spread to a wide range of goods and services.
“INFLATION TAKES UP SURPRISE AGAIN”
Powell stated that the increase in oil and other commodity prices caused by Russia’s attack on Ukraine increased gasoline and food prices and created additional upward pressure on inflation.
Pointing out that the quarantine measures taken against the Kovid-19 epidemic in China are also likely to exacerbate supply chain disruptions, Powell noted that they are extremely careful against the risks posed by high inflation and attach great importance to returning inflation to the 2 percent target.
Powell stated that inflation has been surprising upwards since the bank’s May meeting, and it was decided that a larger increase in the interest rate was necessary in line with this development.
“WE ESTIMATE THAT CONTINUING INTEREST INCREASES WILL BE APPROPRIATE”
“We anticipate continued rate hikes will be appropriate, and their pace will continue to depend on incoming data and the evolving outlook for the economy,” Fed Chairman Powell said.
Stating that the 75 basis point increase in the interest rate was unusually large and he did not expect movements of this size to be widespread, Powell said, “A 50 or 75 basis point increase is likely at our next meeting.”
Expressing that they will continue to convey their thoughts as clearly as possible, Powell said, “We will try to avoid adding uncertainty to an extraordinarily difficult and uncertain time at present.”
Stating that they expect to see progress on inflation, Powell emphasized that they will not declare victory until they see convincing evidence that inflation has fallen.
Powell stated that their goal is to keep the labor market strong and to bring down inflation, noting that they are not trying to cause a recession.