Federal Reserve Chairman Jerome Powell on Friday reiterated the U.S. central bank’s determination to crush the hottest inflation in 40 years, saying that it is imperative for the global financial system for consumer prices to stabilize.
“My colleagues and I are acutely focused on returning inflation to our 2% objective,” Powell said in introductory remarks to a Fed conference on the role of the U.S. dollar. “The Federal Reserve’s strong commitment to our price-stability mandate contributes to the widespread confidence in the dollar as a store of value.”
His comments came just two days after the Fed voted to raise its benchmark interest rate by 75 basis points for the first time since 1994, underscoring just how serious policymakers are about tackling the inflation crisis after a string of alarming economic reports. The move puts the key benchmark federal funds rate at a range between 1.50% to 1.75%, the highest since the pandemic began two years ago.
Powell told reporters at a press conference following the meeting that another 75-basis point or 50-basis point increase is on the table in July as officials race to catch up with runaway inflation. Officials expect the benchmark federal funds rate to hit 3.4% by the end of the year and 3.8% by the end of 2023 – a big upgrade from their March projections.
Although economists have been searching for evidence that inflation is starting to cool, a dismal Labor Department report last week showed the consumer price index unexpectedly surged 8.6% in May, the fastest pace since December 1981. On top of that, a different survey released Monday showed that households are bracing for notably faster price increases, a worrisome sign because Fed officials believe such expectations can be self-fulfilling.
Powell said in his Friday remarks the central bank’s ability to successfully fulfill its dual mandate of full employment and stable prices ultimately hinges on maintaining financial stability.
“The Fed’s commitment to both our dual mandate and financial stability encourages the international community to hold and use dollars,” he said.