Jerome Powell speech: Fed to hike rates until inflation is tamed

“What we need to see,” Powell said, “is clear and convincing evidence that inflation pressures are abating and inflation is coming down. And if ... MONEYPowellsaysFedwillkeephikinginterestratesuntilitcurtailsinflationChristopherRugaberAssociatedPressWASHINGTON(AP)—ChairJeromePowellonTuesdayunderscoredtheFederalReserve’sdeterminationtokeepraisinginterestratesuntilthereisclearevidenceinflationissteadilyfalling—ahigh-stakeseffortthatcarriestheriskofcausinganeventualrecession.TheFed’sincreasesinitsbenchmarkshort-termratetypicallylead,inturn,tohigherborrowingcostsforconsumersandbusinesses,includingformortgages,autoloansandcreditcards.“Whatweneedtoseeisinflationcomingdowninaclearandconvincingway,”PowellsaidinremarkstoaWallStreetJournalconference.“Andwe’regoingtokeeppushinguntilweseethat.”TheFedchair,whowasconfirmedlastweekbytheSenatetoasecondfour-yearterm,suggestedthattheFedwouldconsiderraisingratesevenfasterifpriceincreasesfailtomoderate.“Whatweneedtosee,”Powellsaid,“isclearandconvincingevidencethatinflationpressuresareabatingandinflationiscomingdown.Andifwedon’tseethat,thenwe’llhavetoconsidermovingmoreaggressively.Ifwedoseethat,thenwecanconsidermovingtoaslowerpace.”Highpumppricesgonationwide:Theaveragegaspriceisabove$4ineverystate.Howlongwilltheycontinuetorise?Priciestgasincountry:'Excruciating':Thisworking-classCaliforniacountyhasthemostexpensivegasinthenationAndhesaidtheFed“wouldn’thesitate”topushitsbenchmarkratetoapointthatwouldslowtheeconomyifneeded.Whileitisunclearwhatlevelthatmightbe,Fedofficialspegitatabout2.5%to3%,roughlytripleitscurrentsetting.Powell’sremarksTuesdayfollowedotherstatementshehasmadethathaveindicatedtheFedisimplementingaseriesofratehikesthatcouldamounttothefastesttighteningofcreditinmorethan30years.Atameetingearlierthismonth,theFedraiseditskeyratebyahalf-point—doubletheusualincrease—forthefirsttimesince2000,toarangeof0.75%to1%.Andatanewsconferenceafterthemeeting,PowellsuggestedthatFedofficialswouldcontinuetoraiseitsratebyahalf-point,atbothitsJuneandJulymeetings.TheFedchairappearedunconcernedTuesdayaboutthestockmarket’ssharpdeclineoverthepastsixweeks.ThosedeclinespartlyreflectconcernonWallStreetthattheFed’seffortstoreinininflation,whichhasreached40-yearhighs,couldweakentheeconomysomuchastotriggerarecession.Stockpricesalsooftenfallasinterestratesrise,increasingthereturnfrombonds.WhenaskediftheFed’sratehikescoulddisruptfinancialmarkets,withoutnecessarilybringingdowninflation,Powellresponded,“Idon’tseethathappening.”Theinterestrate,oryield,onthetwo-yearTreasurynotehasrisensteadilysincethestartoftheyear,whichPowellpointedtoasasignthatWallStreetexpectstheFedtokeeptighteningcredit.Suchexpectationsshouldhelpslowborrowingandspending,andcooltheeconomy.“It’sbeengoodtoseefinancialmarketsreactinginadvance”ofupcomingratehikes,Powellsaid.“That’swhatweneed.”TheS&P500,abroadmarketindex,hastumbledabout15%fromitsJanuarypeak.That’sjustshortofthe20%declinethatmarksabearmarket.YetmanyeconomistssayPowellisunlikelytoletmarketdisruptionschangetheFed’spath,giventhatinflationhassoaredtosuchhighlevelsandiscausinghardshipsformillionsofhouseholds.“Themarketsareorderly,they’refunctioning,”Powellsaid.“Therearesomevolatiledaysandvolatilemarkets,butsofar,Iseeusasgettingthroughthisfairlywell.”TheFedchairalsosuggested,moreexplicitlythanbefore,thatthecentralbank’seffortstobringdowninflationmayresultinsomepeoplelosingtheirjobs,pushinguptheunemploymentrate.PowellsaidtheFed’sgoalwastocooloffconsumerandbusinessspendingandbringitmoreintolinewiththerestrainedsupplyofgoodsandworkers.That,inturn,shouldtameinflation.TheFedhopestoaccomplishthat,Powellsaid,whilekeepingthejobmarketstrong.Butthatdoesn’tmeantheunemploymentratewouldnecessarilystayat3.6%,whereitisnow,hesaid.“You’dstillhavequiteastronglabormarketifunemploymentweretomoveupafewticks,”hesaid.