Fed Will Hike Further And Faster If Necessary: Powell

US Federal Reserve Chair Jerome Powell said on Monday that the central bank will raise its benchmark short-term interest rate faster than expected, and high enough to restrain growth and hiring, if it decides such action is necessary to slow rampaging inflation.

At their meeting last week, Fed officials raised their key rate from near zero to a range of between 0.25 and 0.5 percent and forecast they would carry out six more quarter-point hikes this year.

Powell said the Fed would be open to raising rates by a more aggressive half-point at future meetings if necessary and to push rates into “restrictive” territory that would limit growth. The Fed hasn't increased its benchmark rate by a half-point since May 2000.

“We will take the necessary steps to ensure a return to price stability,” he said in a speech to an economics conference. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than (a quarter-point) at a meeting or meetings, we will do so.”

The Fed is under pressure from widespread criticism that it has reacted too slowly to a price spike that has catapulted inflation to four-decade highs. At their meeting last week, Fed officials forecast they would raise rates four additional times in 2023 and that inflation would slow to 2.7 percent by the end of that year.

At the same time, the policymakers projected that the US economy would remain resilient enough to keep growing and that the unemployment rate would fall from its current level of 3.8 percent to 3.5 percent, matching a 50-year low reached before the pandemic.

Some economists argue that such a painless outcome – what they refer to as a “soft landing” – is unrealistic, given the challenges the economy faces, including the potential for deeper economic disruptions resulting from Russia's military campaign in Ukraine.

Powell asserted, however, that the Fed has achieved such soft landings before. “I believe that the historical record provides some grounds for optimism," he said. “Soft, or at least soft-ish, landings have been relatively common in US monetary history.” (AP)