US economy

Powell Says the Fed Is Prepared to Raise Rates to Combat Inflation

The economy has rapidly gained strength, despite the ongoing pandemic, giving rise to persistent supply and demand imbalances and bottlenecks, and to elevated inflation. We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing and transportation. We are strongly committed to achieving our statutory goals of maximum employment and price stability. We will use our tools to support the economy and a strong labor market, and to prevent higher inflation from becoming entrenched. So I don’t think we look to get all of the realignment between demand and supply through the demand channel, although we should get some. But at the same time, we do think we’ll get over the course of this year return to normal supply conditions, and that’s going to affect our policy. I will say though, if, if — if we see inflation persisting at high levels longer than expected, then we will, you know, then will if we have to raise interest rates more over time, we will use our tools to get inflation back. And the main reason is this a reason is this that to get the kind of very strong labor market we want with high participation, it’s going to take a long expansion. We can see that participation is moving only very slowly and to get along expansion, we’re going to need price stability. And so in a way, high inflation is a severe threat to the achievement of maximum employment and to achieving a long expansion that can give.


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