The fight against inflation, which is in the United States at its highest for 40 years, risks weighing on economic growth and employment, warned Thursday, May 12 the president of the American central bank, just confirmed for a second term by the Senate.
“Bringing inflation down to 2% (the Fed’s target, editor’s note) will not be painless, but in the end, the most painful thing would be to fail to counter it and for inflation to remain entrenched in the economy at levels students“said Jerome Powell in an interview on public radio. The head of the Fed had so far said he was confident that the institution would succeed in slowing inflation without slowing down the economy. “We have the tools“, he hammered.
“Our objective, of course, is to bring inflation down to 2% without the economy going into recession, or maintaining a fairly strong labor market.“, he underlined. But things could turn out to be more complicated than initially anticipated: “whether we can execute a soft landing or not, it may actually depend on factors beyond our control“. “A soft landing simply means bringing inflation down to 2% while maintaining a strong labor market. And it’s quite hard to realize right now“, he acknowledged.
The Fed began raising rates to dampen demand, first by a quarter of a percentage point in March and then by half a point on May 4 — the biggest hike in more than 20 years. Key rates are now between 0.75 and 1.00%. And further increases are to be expected until the end of the year.