Powell: “More US rate hikes”. Inflation remains far from 2%
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WASHINGTON. There is still a long way to go to bring inflation down to 2%, other interest rate hikes are to be planned. Federal Reserve number one Jerome Powell was heard yesterday for over three hours by the House Finance Committee and stressed that two hikes by the end of the year “are a fairly correct forecast”, after the “prudent” pause in June. Last week the Fed decided to keep interest rates unchanged at 5% – 5.25% after ten consecutive hikes. Powell reiterated the US central bank’s approach, which is that any decision on how to use monetary leverage will take place “meeting after meeting” by analyzing the economic data held by Federal Reserve analysts, with particular attention to labor market statistics.
The fact is that inflation, remarked the number one of the Fed, is still too high and the goal of bringing it to 2% is unchanged.
For this, patience will be needed, acting on the various factors that have pushed up inflation, and further tightening the cost of money. “Inflation has moderated since the middle of last year – explained Powell – but inflationary pressures are still too strong”. What is worrying is the underlying one, the «core index», which excludes energy and foodstuffs and is considered the most reliable for measuring price volatility. The “core index” was in fact at 4.7% on an annual basis in April.
Powell explained to MPs that “the full effect” of the monetary tightening takes time to materialize, even if “we are approaching our destination”.
On Capitol Hill, the head of the Fed found deputies determined to press him on the question of the solidity of the banking system in the light of the spring crises. Powell reiterated – along the lines of what was done in recent days by Treasury secretary Janet Yellen – that the US banking system is “strong and solid”, however he did not hide that there are problems and said that the Silicon Valley Bank crisis is arrived without any warning, but the emergency lasted for a weekend. However, the head of the Fed predicted in the light of the economic situation “difficult times could come for those banks that have a high concentration of debt” and did not rule out a summer meeting, even virtual, to approve new rules for the financial system. In which the dollar will remain «the dominant currency». —
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