The US economy is strong, but it faces an “uncertain” global environment and could see more inflation “surprises”the Federal Reserve Chairman said, Wednesday, Jerome Powell.
In the first two days of testifying before Congress, Powell reiterated that the Fed understands the difficulties caused by higher prices. It is committed to reducing inflation, which has reached its highest level in 40 years.
The US central bank announced last week The sharpest rate hike in nearly 30 years She promised more action to combat price hikes, with gasoline and food prices skyrocketing and millions of Americans struggling to make ends meet.
But the more they increase Fears that a rapid tightening of financial conditions could go too far and push the world’s largest economy into recessionPowell insisted that The US economy is “very strong and well-positioned to handle tighter monetary policy”.
“It is clear that inflation has surprised the upward trend over the past year, and more surprises can be expected.”the chairman of the Federal Reserve said to the Senate Banking Committee in his semi-annual appearance.
equations Policies ‘must be flexible’ Given that the economy “often evolves in unexpected ways,” he said.
Last week’s massive 0.75 percentage point increase in the benchmark interest rate was the third since March, raising the benchmark interest rate overall by 1.5 points. s Powell said at the time that more such increases were likely in July.
The Fed is facing hard Criticisms that it has been too slow to respond to the changing economyThat benefited from an avalanche of incentives from the federal government.
Powell did not explicitly mention the risks of recession in his opening remarks, but was confident that senators would question him about the possibility.
‘Necessary’ to curb inflation
In addition to relieving the financial pressure on American families, especially those with fewer resources, President The Fed said that controlling inflation is “essential…if we are to have a sustained period of strong labor market conditions that benefit everyone.”
The US economy has quickly recovered from the Covid-19 pandemic, aided by robust consumer spending, and continues to do so Create job opportunities at a rapid pacean average of 408,000 people in the past three months.
The Unemployment is close to a 50-year low.
But rising demand for homes, cars and other goods has hit supply chains in parts of the world where the Covid-19 virus has remained and remains a challenge.
it’s a It fueled inflation, which worsened dramatically after Russia invaded Ukraine in late February Western countries imposed harsh sanctions on Moscow, which led to skyrocketing food and fuel prices.
Powell said that the consequences The conflict in Ukraine “They are creating additional upward pressure on inflation.”
also, The Covid-19 related shutdowns in China are likely to exacerbate ongoing disruptions to the supply chain.
But he pointed out that the problem is not limited to the United States alone.
“Over the past year, inflation has also increased rapidly in many foreign economies.”He said.
In fact, several major central banks have joined the Fed in starting to tighten monetary policy, with the notable exception of the Bank of Japan.
Powell pointed to the signs that the Higher rates have an effectwith business investment slowing and “Activity in the housing sector appears to be weakening, partly reflecting higher mortgage rates.”
Average home loan rates rose to 5.23 percent in May for a 30-year fixed-rate mortgage from 4.98 percent in April, according to Freddie Mac, while the The median home price exceeded $400,000 for the first time.
The tightening of financial conditions we have seen in recent months should continue to moderate growth and help to achieve a better balance between demand and supply”Powell said.
(With information from AFP)