Powell says Fed will not hesitate to keep raising rates until inflation falls

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Federal Reserve Chairman stressed his determination to reduce inflation, saying on Tuesday that he would support raising interest rates until prices fall back to healthy levels.

“If that means going beyond what is known as neutral, then we won’t hesitate to do so,” the central banker told the Wall Street Journal in a live interview. “We’re going to keep going until we feel like we’ve reached a point where we can say financial conditions are in place and we’re seeing inflation coming down.

“We will get to this point. There will be no hesitation about it,” he added.

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Earlier this month, the Federal Reserve raised interest rates by half a percentage point, the second hike in 2022, as inflation is at a 40-year high.

Powell said after the rate hike that a similar 50-basis-point swing could be seen in subsequent sessions as long as economic conditions remain similar to what they are now.

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On Tuesday, he reiterated his pledge to bring inflation closer to the Fed’s 2 percent target, warning that doing so may not be easy and could come at the cost of an unemployment rate of 3.6 percent, slightly above the lowest level since the late 1960s .

“If the unemployment rate goes up a few notches, you still have a strong job market,” he said. “I would say, as I said, there are many plausible paths to a soft landing. Our job is not to destroy the opportunity, but to work towards it.”

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However, tighter monetary policy fueled fears of a further economic downturn and sparked a massive sell-off on Wall Street. In addition to raising interest rates by 75 basis points, the Fed also halted its monthly bond-buying program, also known as quantitative easing, and will unwind some of its $9 trillion in asset purchases starting next month.

Powell said he still hopes the Fed can achieve its inflation target without hurting the economy.

“If the unemployment rate goes up a few notches, you still have a strong job market. I would say there are a lot of possible paths to a soft landing, like I said, a soft landing. Our job is not to destroy opportunity, but to Work hard to make it happen,” he said.

He added that “returning to price stability could bring some pain” but said the labor market should remain strong, with low unemployment and higher wages.

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