Powell swears the Fed is ‘extremely focused’ on cutting inflation

Federal Reserve Board Chairman Jerome Powell speaks to reporters after the Federal Reserve raised its target interest rate by three-quarters of a percentage point to stem a disruptive surge in inflation, during a a press conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, United States, June 15, 2022.

Elizabeth Frantz | Reuters

Federal Reserve Chairman Jerome Powell reiterated the central bank’s commitment to reducing inflation, saying on Friday it was essential for the global financial system.

“The Federal Reserve’s strong commitment to our price stability mandate contributes to widespread confidence in the dollar as a store of value. To that end, my colleagues and I are strongly focused on getting inflation back to our 2% target,” Powell said in his introduction. remarks for a Fed-sponsored conference on the global role of the US currency.

The remarks come two days after the Federal Open Market Committee voted to raise benchmark interest rates by three-quarters of a percentage point to a target range of 1.5% to 1.75%. Banks use the rate to set borrowing costs for short-term loans they make to each other, but it also affects a host of consumer products like credit cards, home equity loans and car financing.

Inflation has soared over the past year, with the consumer price index posting an 8.6% increase in May over the past year.

Fed officials target 2% inflation as healthy for a growing economy and have said they will continue to raise rates until prices return to that range.

As inflation hurts consumers through the prices they pay at the grocery store and at the gas pump as well as a host of other activities, Powell’s remarks on Friday focused on its global financial importance.

“Achieving our dual mandate also depends on maintaining financial stability,” Powell said. “The Fed’s commitment to our dual mandate and financial stability encourages the international community to hold and use dollars.”

In addition to price stability, the Fed is responsible for maintaining full employment.

Powell cited the importance of the dollar in global financing, noting in particular the importance of vehicles such as the one the Fed put in place during the Covid pandemic which lent greenbacks to global central banks in need of liquidity. .

He also noted upcoming changes in the global financial system, including the use of digital currencies and payment systems like FedNow, a service that is expected to go live in 2023.

A digital currency, as discussed by Fed officials, could help support the dollar as the world’s reserve currency, he said.

“Looking ahead, rapid changes are occurring in the global monetary system that could affect the international role of the dollar in the future,” Powell added.

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