Federal Reserve chair: Banking issues may indicate high rate hikes not necessary to control inflation

Federal Reserve Chairman Jerome Powell speaks during a news conference in Washington. FILE AP PHOTO (AP Photo/Carolyn Kaster) (Carolyn Kaster, Copyright 2023 The Associated Press. All rights reserved)

WASHINGTON – Federal Reserve Chair Jerome Powell said on Friday that economic data analysis shows there is progress and there is more “progress in the pipeline.”

Powell’s public talk with Ben Bernanke, a former Federal Reserve chair, comes as high inflation divides economists over how to manage interest rates — after 10 consecutive aggressive increases.

“We haven’t made any decisions,” Powell said about rates ahead of a meeting in June adding that the banking sector’s issues indicate that high rate hikes aren’t exactly necessary to control inflation.

Powell has raised the rate by 5 percentage points in the last 14 months, and this has affected mortgage rates and home sales. Economists also expect an impact on auto loans and credit card debt.

Powell also said that the “financial stability tools” at his disposal have helped to calm conditions in the banking sector.

“Developments there, on the other hand, are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring, and inflation, so as a result, our policy rate may not need to rise as much as it would have otherwise to achieve our goals. Of course, the extent of that is highly uncertain,” Powell said.

Bernanke and Powell agreed inflation is still too high in the United States. Bernanke said many Americans are experiencing high inflation for the first time in their lives.

“We think that failure to get inflation down would not only prolong the pain but also increase ultimately the social costs of getting back to price stability, causing even greater harm to families and businesses, and we aim to avoid that,” Bernanke said.

Powell is also tracking the unemployment rate which has decreased. The conversation is part of a monetary policy conference that the Federal Reserve is hosting in Washington, D.C.

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About the Author:

The Emmy Award-winning journalist joined the Local 10 News team in 2013. She wrote for the Miami Herald for more than 9 years and won a Green Eyeshade Award.