Powell Justifies More Aggressive Approach on Rates With Econ Progress

Q: Is the idea to decrease consumption and investment?

• A: You can see places where demand exceeds supply and resulting in prices going up at unsustainable levels. As we raise rates, demand moderates, businesses invest a little less, consumers spend a little less.
• Ultimately getting supply and demand back in balance is what gives us 2% inflation. Yes there may be pain but the big pain is in not dealing over time with inflation and allowing it to become entrenched.

Q: You seem much more aggressive now vs the March dot plot?

• A: [Powell recounts the progress of the economy and inflation starting in the middle of fall 2021]
• Ever since the November meeting, we have been adapting. The FOMC moved in December to 3 2022 rate increases, then 7 at the March meeting. That process is continuing. I mentioned in March that noone should look at any single SEP as a real resting place for 90 days, because we are in a fast evolving situation.
• Unanimous vote today, and I told you the guidance, that broad support on the committee to have 50 basis point hikes on the table at the next couple of meetings.