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MNI (RPT): Fed Powell Says Open to Larger Rate Hikes If Needed

(Repeats article first published on March 22)

Federal Reserve Chair Jerome Powell on Monday pledged to "take the necessary steps" to return inflation to 2%, including hiking benchmark interest rates by more than 25bps at a time and taking policy into restrictive territory.

"We will take the necessary steps to ensure a return to price stability," he told a National Association of Business Economists conference in Washington. "In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well."

Inflation is "much too high," and the war in Ukraine has heightened the risk that an extended period of high inflation could push longer-term inflation expectations "uncomfortably higher," underscoring the need for the FOMC to "move expeditiously," the Fed chair said.

The FOMC at its meeting last week said it expects to raise the fed funds rate to 1.9% by the end of the year and above its estimated longer-run value by the end of 2023.

"I believe that these policy actions and those to come will help bring inflation down near 2% over the next 3 years," Powell said.

SOFT LANDING POSSIBLE

The Fed chief expressed confidence in the U.S. economy's ability to withstand tighter monetary policy and higher oil prices, noting oil shocks now weigh less on output than it did in the 1970s because the U.S. has become the top global producer of oil.

The labor market has substantial momentum, with record job openings, quits rates and high nominal wage growth, Powell said. By many measures it is tighter than before the pandemic, and unemployment is projected to hold steady as higher rates help bring down inflation.

"Our goal is to restore price stability while fostering another long expansion and sustaining a strong labor market," he said.

MNI Washington Bureau | +1 202-371-2121 | jean.yung@marketnews.com
MNI Washington Bureau | +1 202-371-2121 | jean.yung@marketnews.com

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