US Federal Reserve Chairman Jerome Powell stressed, on Wednesday, US Federal Reserve Chairman Jerome Powell, on Wednesday that the US economy is still strong, despite the slowdown in growth, which he stressed does not present any recession risks at present.
Powell said in a press conference, “It is a strong economy. Nothing suggests that it is close to or vulnerable to recession,” after the reserve announced an increase in key interest rates and indicated the possibility of approval of further increases.
He indicated that central bank officials are not “actively” considering a three-quarter percentage point rate increase in upcoming monetary policy meetings.
In response to a question at a news conference after the Federal Reserve’s latest meeting, which decided to raise rates by half a percentage point and indicated further increases are expected, Powell said, “A 75 basis point increase is not something the committee is actively considering.”
The interest rate futures markets give a high probability that the Federal Reserve will raise rates by three-quarters of a percentage point at its next meeting in June.
“Inflation is very, very high, and we know it’s causing difficulties,” Powell said.
“Additional increases of 50 basis points should be on the table at the next two Federal Reserve meetings,” he added.
He stressed that the main focus is to reduce inflation to return to 2%.
On Wednesday, the Federal Reserve decided to raise the main interest rate by half a percentage point as the most aggressive step so far in its battle against rising inflation.
Along with the price hike, the central bank has indicated that it will start reducing asset holdings on its $9 trillion balance sheet. The Fed was buying bonds to keep interest rates low and money flowing through the economy, but the rate hike necessitated a dramatic rethink of monetary policy.
The Fed stated that COVID-19-related shutdowns in China are likely to exacerbate supply chain problems, in addition to Russia’s invasion of Ukraine causing enormous humanitarian and economic hardship.
