Federal Reserve Chair Jerome Powell made clear Wednesday that the Fed will begin raising interest rates this month in a high-stakes effort to restrain surging inflation.
WASHINGTON — Chair Jerome Powell said Wednesday that he supports a traditional quarter-point increase in the Federal Reserve’s benchmark short-term interest rate when the Fed meets later this month, rather than a larger increase that some of its policymakers have proposed.
“We have an expectation that inflation will peak and begin to come down this year,” Powell said. But he added: “To the extent inflation comes in higher … then we would be prepared to move more aggressively” by raising rates by more than a quarter point later this year. Economists have forecast that the Fed will implement five to seven quarter-point hikes this year. This month’s increase would be the first since 2018. And it would mark the beginning of a delicate challenge for the Fed: It wants to increase rates enough to reduce inflation, now at a four-decade high, but not so fast as to choke off growth and hiring.
Still, he added that the central bank expects inflation to gradually decline this year as tangled supply chains unravel and consumers pull back a bit on spending. In public statements, central bank officials have been debating whether to raise rates this month by a half-percentage point — an aggressive move — though most have backed a traditional quarter-point increase. Russia’s invasion of Ukraine has made a half-point increase even less likely.
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