Fed Chair Vows To Keep Raising Interest Rates To Lower Inflation

Federal Reserve (Fed) Chairman Jerome Powell says the U.S. central bank will continue to
raise interest rates until there is “clear and convincing evidence” that inflation is declining.

“We will go to that point and there won’t be any hesitation about that,” Powell said in a public
speech.

With inflation in the U.S. running at a 40-year high, the U.S. central bank has raised interest
rates in recent months to dampen spending and investment. The Fed's preferred measure of
inflation showed prices rising by 6.6% on a yearly basis in March, well above the central bank's
2% target.

“There could be some pain involved in restoring price stability, but we think we can sustain a
strong labor market,” Powell said. The U.S. unemployment rate is currently at a historically low
3.6%.

After holding the federal funds rate at near-zero since the beginning of the pandemic, the Fed
moved in March of this year to raise rates by 0.25%. In May, the Fed raised rates by 0.50% —
its largest move in a single meeting since May 2000.

Powell said that there was “broad support” for additional 0.50% moves at the next two policy-
setting meetings. That could potentially lift the trendsetting federal funds rate to between 1.75%
and 2.00% by the end of July this year.

Powell reiterated that the central bank’s goal is to to pull back pandemic-era stimulus without
triggering a wave of job losses and an abrupt drop in economic activity in the U.S. For the Fed,
a “soft landing” would be achieving lower inflation with only a modest downturn in U.S.
economic growth.

The Fed’s next policy-setting meeting is scheduled to take place June 14 and 15.