Federal Reserve Chair Jerome Powell promised to snuff out surging inflation by directing the Federal Reserve to crank up interest rates until inflation can be seen “coming down in a clear and convincing way.”
According to Reuters, while speaking at a Wall Street Journal event, Powell stated, “If we don’t see that (inflation coming down after rate hikes), then we’ll have to consider moving more aggressively.”
Fed officials estimate benchmark rates could be raised as high as 3%, according to ABC News, approximately triple the current rate. It could be the quickest tightening of credit in decades.
Powell acknowledged the discomfort that sharp increases in benchmark interest rates could bring to the country. While arguing rate hikes could tame inflation without causing a recession, he admitted slower economic growth and rising unemployment might occur.
He went on to say, “Achieving price stability, restoring price stability, is an unconditional need. Something we have to do because really the economy doesn’t work for workers or for business or for anybody without price stability. It’s the bedrock of the economy really.”
In March, inflation skyrocketed in the United States, hitting a 41-year high of 8.5%. Gasoline and food prices spiked considerably that month, at 32% and 9.4%, respectively, with the inflation rate for food the highest recorded since April 1981.
Several factors led to the current inflationary crisis. Labor shortages, supply chain disruptions, and high demand stimulated by $5 trillion in COVID relief contributed to the distortion of traditional pricing mechanisms and the crippling of Americans’ purchasing power.