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Fed Powell: Inflation could surprise further to the upside

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Fed Chairman Jerome Powell said the Fed will work to bring inflation back to 2%. In a briefing to Congress, Powell said higher interest rates will ease asset prices. Regarding the rise in inflation, Powell said, “Inflation has surprised on the upside and may surprise even more, but the Fed will continue to respond to this based on incoming data and changing outlooks.” .

Fed Chairman Powell said:

The Fed is heavily committed to bringing inflation back. The Fed expects further rate hikes to be appropriate. The pace of future rate hikes will continue to depend on future data and the evolution of the economic outlook. We will make our decisions from meeting to meeting. Lowering inflation is essential if the US is to maintain a robust labor market era that will benefit all Americans. They point out that core inflation given for May will reach 4.9 percent level in April or decline slightly. The Fed’s goal is to bring inflation back to its 2 percent target and firmly anchor inflation expectations over the longer term. Recent data indicates that real GDP has recovered in the current quarter and that consumer spending remains high. Tightening financial conditions will continue to slow growth. The Fed will continue to communicate with the market as openly as possible regarding its thoughts. Inflation surprised on the upside and may surprise even more, but the Fed will continue to respond based on incoming data and outlook. The economy is very strong and well positioned to overcome a more restrictive monetary policy. A Fed rate hike will not bring down gas or food prices. Higher interest rates will reduce asset prices. A series of further rate hikes have been discounted, which is convenient. The latest inflation indicators show that we need to accelerate our rate of interest rate hike. We have understood the full scale of the inflation problem. We need to restore price stability. We are strongly committed to reducing inflation. We have never largely used rules to set policy in real time. Markets have discounted a lot from the tightening, which is affecting the economy. Price inflation is a macroeconomic problem. Our tools cannot influence energy and food inflation. We have focused on the parts of inflation that we can deal with. We can lower the demand. Inflation is a very global problem. US inflation is mainly due to increased demand. The full impact of the closures is not seen in China.

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We are trying to reduce the growth in demand. The situation in the agricultural sector is extremely difficult. We must restore price stability, it will help everyone. Our official rate is still relatively low. Our long-term neutral level is around 2.5%. One possibility is that our rate hikes could cause a recession. Mortgage securities may need to be sold at a future date. The job market is unsustainable. We are far from the target of inflation.

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We do not think it necessary to provoke a recession, but we believe it is important to achieve price stability. We don’t want to cut wages, we want a more sustainable rate of increase. We are seeing some evidence of a flattening of wage increases.

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