By Howard Schneider and Ann Saphir
WASHINGTON – Federal Reserve Chairman Jerome Powell said on Thursday that the US central bank’s battle to rein in inflation “will include some pain” as the impact of rising interest rates is felt, but that the The worst outcome would be for prices to continue accelerating.
“We fully understand and appreciate how painful inflation is,” Powell said in an interview with the national Marketplace radio show, repeating his expectation that the Fed will raise interest rates by half a percentage point at each of its next two policy meetings. monetary politics.
At the same time, he promised that if the data turns out to be contrary to what is expected, “we are prepared to do more.”
“Nothing in the economy works, the economy doesn’t work for anybody without price stability,” Powell said. “We went through periods in our history when inflation was quite high (…). The process of bringing inflation down to 2% will also include some pain, but ultimately the most painful thing would be if we failed to cope and inflation entrenched at high levels.”
The US economy is facing its toughest inflation problem since the 1970s and early 1980s, when prices rose at an annual rate of 14.5% and then Federal Reserve chief Paul Volcker , used interest rates to drive the economy into recession twice. The unemployment rate exceeded 10%.
Powell, who was confirmed earlier on Thursday for a second four-year term as Fed chief, has paid frequent tributes to Volcker’s commitment to defeating inflation, but has said he believes the central bank can guide a ” soft landing” in which inflation falls without a recession.
Interest rates are rising sharply as a result of Powell’s monetary measures.
Although neither inflation nor borrowing costs are anywhere near Volcker-era levels, the rapidly rising cost of food, gasoline, housing and other basics has become a politically explosive issue for the US government. PresidentJoe Biden. In April, consumer prices were 8.3% higher than a year ago.
Biden has already held the two most important positions at the Federal Reserve and has seen two more of his appointments confirmed for the central bank’s Board of Governors, which has seven seats. The president made it clear this week that he gave them full power to try to reduce inflation.
“Tackling inflation is my top national priority,” Biden said after Powell’s confirmation by the Senate. The Fed “will bring the skill and knowledge needed at this critical time for our economy and families across the country.”
Powell, who opened a news conference after last week’s monetary policy meeting by saying he wanted to “restore price stability to American families,” used Thursday’s radio interview to get that message across to a broader audience. .