Federal Reserve Chairman Jerome Powell said it is going to be “very challenging” for the central bank to rein in inflation without triggering a recession.
Powell acknowledged during a Thursday International Monetary Fund panel that the Fed will likely have to act more aggressively than initially thought to depress the country’s soaring inflation. Consumer prices increased 8.5% in the 12 months ending in March, a faster rate of inflation at any time since December 1981.“Our goal is to use our tools to get demand and supply back in sync so that inflation moves down and does so without a slowdown that amounts to a recession,” Powell said.
Powell, a Republican who was renominated for his position by President Joe Biden last year, said that with surging inflation, “it is appropriate, in my view, to be moving a little more quickly” to raise interest rates. Most investors now foresee a half-point hike in May, with the likelihood of the more aggressive rate hike occurring pegged at nearly 100%, according to CME Group’s FedWatch tool, which calculates the probability using Fed fund futures contract prices. A majority of investors are also predicting two more half-point hikes in June and July, a much more intense pace than thought just weeks ago.The yield on the five-year Treasury note is now at 2.
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