Powell: Fed may raise rates more to fight high inflation

Xinhua News Agency, Washington, January 11 – Chairman of the Federal Reserve Board Powell, 11, said the Fed will raise interest rates or more, and earlier, more quickly shrink their balance sheets to cope with the US persistent high inflation situation.

Powell said at a nomination hearing held by the U.S. Senate Banking Committee that day that if U.S. high inflation persists longer than expected, and if the Fed has to raise interest rates more times over time, “we will do it . ” He said that U.S. inflation is currently well above the Fed’s 2% target, indicating that the U.S. economy no longer needs the support of a highly accommodative monetary policy, and the Fed will use its policy tools to prevent high inflation from becoming more stubborn.

Powell said the normalization of Fed monetary policy will be a long process. First, the Fed will end its asset purchases in March, followed by rate hikes this year, with the Fed likely to start shrinking its balance sheet later this year.

Powell said the U.S. economy is in completely different shape and has a larger balance sheet than the last time the Fed tightened monetary policy. As a result, the Fed will shrink its balance sheet earlier and faster this time around, with a shorter time interval between ending its asset purchases and starting to shrink its balance sheet.

The minutes of the Fed’s December monetary policy meeting released last week showed that in the context of a strengthening U.S. economy and rising inflation, the Fed may raise interest rates ahead of schedule and start the process of reducing its balance sheet thereafter. Most Fed officials expect three rate hikes this year. Wall Street institutions such as Goldman Sachs have predicted that the Federal Reserve will raise interest rates four times this year. The data shows that the size of the Fed’s balance sheet is currently more than 8.7 trillion US dollars.

U.S. President Biden nominated Powell for re-election as Fed chairman in November last year, and Fed Governor Brainard as vice chairman. Both nominations are subject to Senate approval.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/powell-fed-may-raise-rates-more-to-fight-high-inflation/
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