Fed likely to hike rate further, Powell says

WASHINGTON－Fed Chairman Jerome Powell said on Monday that the Federal Reserve of the United States would raise its benchmark short-term interest rate faster than expected, and high enough to restrain growth and hiring, if it decides this would be necessary to slow rampaging inflation.

Powell's message was more hawkish than his comments after last week's Fed meeting, when officials raised their key rate a quarter-point from near zero to a range of 0.25 to 0.5 percent. "Hawks" typically support higher rates to stave off inflation, while "doves" generally prefer lower rates to bolster hiring.

His remarks, in a speech to the National Association for Business Economics, caused a sharp drop in the stock market, with its implication that potentially much higher rates could be on the way for mortgages, auto loans, credit cards and other consumer and business borrowing. US stocks later recovered, with the S&P 500 index ending the day down less than 0.1 percent.

Powell said that if necessary, the central bank would be open to raising rates by a comparatively aggressive half-point at multiple Fed meetings. The Fed has not raised its benchmark rate by half point since May 2000.

He added that policymakers could go so far as to send rates into "restrictive" territory that would slow economic growth and possibly raise the unemployment rate if needed to tame high inflation.

"We will take the necessary steps to ensure a return to price stability," said Powell in his speech to the association. "In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points (quarter-point) at a meeting or meetings."

The Fed is under pressure from widespread criticism that it has reacted too slowly to a price spike that has catapulted inflation to four-decade highs. When they met last week, Fed officials forecast that they would raise rates six more times this year and four times in 2023.

Powell cautioned on Monday that those projections of future interest rates and inflation "can become outdated quickly at times like these, when events are developing rapidly".

Also on Monday, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said controlling inflation "is the top concern that I have for 2022".

Agencies Via Xinhua