Jerome Powell, chairman of the Federal Reserve Bank, has confirmed his intention to act swiftly to tame soaring inflation.
Powell said a rate hike of 50 basis points is likely to be “on the table” at a Fed meeting in May. While Fed typically hikes rates by 25 basis points at a time, officials have discussed steeper increases to bring inflation back to its target level.
“It is appropriate in my view to be moving a little more quickly,” Powell said at a panel discussion hosted by the IMF last night. “I would say that 50 basis points will be on the table for the May meeting.”
“The big issue that we’re very focused on is inflation and getting inflation back down to our two per cent goal,” Powell added.
The Fed resisted raising rates in 2021 to support the economy amid the Covid-19 crisis. Annual inflation reached 8.5 per cent in March – its highest level for 40 years – underscoring the need for action.
Markets are now expecting half-point rate rises at the next three policy meetings, with the central bank expected to return to quarter-point increases after July.
“It’s absolutely essential to restore price stability,” said Powell. “Economies don’t work without price stability.”
Analysts at Goldman Sachs this week warned that the chances of the US entering a recession in the next two years has hit 35 per cent.