Stock版 - Fed committed to inflation fight, but not trying to trigger recession |
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发帖数: 894 | 1 By Ann Saphir and Lindsay Dunsmuir
June 22 (Reuters) - The Federal Reserve is not trying to engineer a
recession to stop inflation but is fully committed to bringing prices under
control even if doing so risks an economic downturn, U.S. central bank chief
Jerome Powell said on Wednesday.
"We are not trying to provoke, and I don't think we will need to provoke, a
recession," Powell said at a hearing before the U.S. Senate Banking
Committee, although he acknowledged that a recession was "certainly a
possibility" and events in the last few months around the world had made it
more difficult to reduce inflation without causing one. (Full Story)
"It is essential that we bring inflation down if we are to have a sustained
period of strong labor market conditions that benefit all," Powell said,
adding that the Fed in coming months will be looking for "compelling
evidence" of slowing price pressures before it eases up on the interest rate
increases it kicked off three months ago.
Inflation continues to run well above the Fed's targeted level of 2%. A
gauge of price increases that excludes volatile food and energy costs may
have flattened out or eased somewhat last month, Powell testified, but
Russia's invasion of Ukraine and COVID-19 lockdowns in China are putting
continued upward pressure on inflation.
One week ago, the Fed raised its benchmark overnight interest rate by three-
quarters of a percentage point - its biggest hike since 1994 - to a range of
1.50% to 1.75%, and signaled rates would rise another 1.75 percentage
points this year.
That steep rate hike path, designed to slow the economy, has sparked
widespread concern about a recession and a weakening of labor markets.
On Wednesday, Powell reiterated that ongoing increases in the Fed's policy
rate would be appropriate, with the exact pace dependent on the economic
outlook, and he declined to rule out a 100-basis-point move if it proved
warranted.
"Inflation has obviously surprised to the upside over the past year, and
further surprises could be in store," he said, repeating that policymakers
would need to be nimble in response to the incoming data.
'COUGHING UP BONES'
Since the June 14-15 policy meeting, a number of Powell's fellow
policymakers have lined up behind his comments last week that the central
bank will very likely need to raise rates by either 50 or 75 basis points at
its next meeting in July.
Earlier on Wednesday, Philadelphia Fed President Patrick Harker said
incoming data would govern which of the two options to deliver. Chicago Fed
President Charles Evans signaled later on Wednesday that he also is
comfortable for now with continued rapid rate hikes. (Full Story) (Full
Story)
But in an indication of how inflation has emerged as a thorny political
issue that threatens to tip the balance of power in Congress to Republicans
in elections this November, Powell found himself under fire from both the
left and right.
Senator Elizabeth Warren, a Democrat representing Massachusetts, took the
Fed to task for pushing through rate hikes that raised the risk of a
recession that could put millions out of work.
Republican Senator John Kennedy of Louisiana, in one of the more heated
criticisms of the Fed's response to inflation, said inflation was hitting
his constituents "so hard they are coughing up bones."
The median projection among Fed policymakers released last week showed they
expect the target rate to rise to 3.4% by the end of the year.
Overall, Powell did not stray far from his remarks in his news conference
that followed the end of the Fed's latest policy meeting, but his assertion
that financial conditions had "tightened significantly" seems significant
and may herald a slower pace of rate hikes ahead, Karim Basta, chief
economist at III Capital Management, wrote in a note.
Interest rate futures ticked higher through the course of Powell's
appearance, moderating some of the expectations for additional big rate
increases at the Fed's remaining four policy meetings of the year.
While another 75-basis-point increase in July remains seen as the most
likely outcome, according to CME Group's FedWatch tool, rate futures now
signal that the Fed will dial that back to a half-percentage-point rise in
September. For year's end, it was increasingly seen as a toss-up between a
policy rate in either a range of 3.25% to 3.50% or 3.50% to 3.75%.
Economists polled by Reuters before the appearance see the Fed delivering
another 75-basis-point interest rate hike in July, followed by a half-
percentage-point rise in September, with no scaling back to quarter-
percentage-point moves until November at the earliest. (Full Story)
Fed officials' latest projections see economic growth slowing to below trend
this year while the U.S. unemployment rate - currently 3.6% - starts to
tick higher. Meanwhile, they have materially tempered their expectation for
how quickly inflation will subside, with a median forecast for a year-end
annual rate easing to 5.2% by their preferred measure from 6.3% as of April.
In March, they had put that figure at 4.3%.
(Reporting by Dan Burns, Ann Saphir and Lindsay Dunsmuir
Editing by Chizu Nomiyama and Paul Simao)
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Keywords: USA-SENATE/POWELL (UPDATE 4, PIX, TV) |
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