Jerome Powell: We will slow interest rates when inflation goes to 2 percent

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Fed Chair Powell A 50 or 75 basis point hike seems likely at our next meeting

The Federal Reserve increased its benchmark interest rate by a significant three-quarters of a point for the third time in a row on Wednesday in an effort to combat excessive inflation. This aggressive pace will increase the likelihood of an eventual recession.

Speaking after the third rate hike of 75 basis points, US Federal Reserve (Fed) Chairman Jerome Powell said, “We need to make sure that inflation is back to 2 percent before we cut rates. When we are sure that inflation is heading towards 2 percent, we will slow the pace of interest rate hikes.”

Important headlines from the speech of US Federal Reserve Powell are as follows:

“We are reorienting our monetary policy stance toward our goal of achieving price stability.

Despite the slowdown in growth, the job market has remained strong.

It will be necessary to continue raising interest rates. We have the tools to bring inflation to the 2 percent target. We are steering our monetary policy stance towards our objective of achieving price stability.”

Restoring price stability while achieving a soft landing will be a challenge.

Commodity prices appear to have peaked.

Long-term inflation expectations remain fairly well anchored. This will make it easier to bring inflation down.

We need to get to a certain level in interest rates and stay there for a while, but we are not yet where we need to be.

It will probably take some time to see the full effects of the changing financial conditions on inflation.

So far we have seen only moderate signs that the labor market is cooling.

We need to make sure that inflation is back to 2 percent before we cut rates. Once we are sure that inflation is heading towards 2 percent, we will slow the pace of rate hikes.

The FOMC is strongly committed to bringing inflation down, and we will keep raising rates until we finish our job.”

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