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Fed Chairman Jerome Powell: US Economy “Very Strong” – Paving the Way for Further Rate Hikes | news

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According to the head of the US Federal Reserve (Fed), Jerome Powell, the US economy is “very strong” and can cope with hikes in the benchmark interest rate. The central bank’s priority is to regain high inflation, which is why there will continue to be “rapid progress” towards higher interest rates, Powell told a US Senate committee on Wednesday. “We need to restore price stability,” Powell said. The US economy is “in a good position” to cope with the highest benchmark interest rate.

The Fed raised the key interest rate for the world’s largest economy by 0.75 percentage points from 1.5 to 1.75 percent last week. At the same time, the central bank announced another 0.5 or 0.75 percentage point hike for the end of July. It is now a balancing act for the Fed to stop rising inflation without slowing the economy too much. If the economy and the labor market collapse, a recession could be imminent.

“The tightened financial conditions we have seen in recent months should further moderate growth and help bring demand into better balance with supply,” said Powell. The central bank’s goal is to curb demand growth, but not slow demand itself, which would lead to a recession, Powell said.

After a slight decline in the first quarter, according to early indicators, the economy grew again in the second quarter, Powell said. Asked whether too high interest rates could lead to a recession, Powell said, “It’s certainly a possibility. It’s not the desired outcome, but it’s certainly a possibility.”

The US inflation rate has been well above the Fed’s medium-term target of two percent for several months. In May, for example, consumer prices rose by 8.6 percent compared to the same month last year. The unemployment rate remains at a very low 3.6 percent.

Senator John Kennedy of the state of Louisiana said the rapid price hikes are hitting people hard. Given the difficult economic situation, the Federal Reserve must act, he told Powell. “Right now you are the most powerful man in the United States, perhaps in the whole world,” he said.

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