The US raised interest rates the most in more than 20 years, the Fed chairman must reassure people

The screen shows the speech of US Federal Reserve Chairman Jerome Powell at the New York Stock Exchange (NYSE) on 4-5 – Photo: REUTERS

Faced with inflation at the highest level in four decades, Fed Chairman Jerome Powell sent a direct message to the American people, expressing concern about the pain of soaring prices and pledging to use all technologies. Tools are available to lower the price.

But he remains confident that the US economy is strong enough to withstand the rate hikes without falling into a recession.

According to the AP news agency, the Fed has officially raised the lending interest rate applied to banks across the country from the current range of 0.25%-0.5% to 0.75%-1%.

Previously, the Fed raised the benchmark interest rate by 0.25 percentage points in March.

In a statement released after the meeting, the Federal Open Market Committee (FOMC), the Fed’s policy-making body, noted that economic activity had slowed in the first quarter of 2022, inflation was still too high. .

Rising interest rates will increase the cost of all forms of borrowing, from credit card mortgages to consumer loans, reducing consumer demand and business activity.

Inflation has become a major concern for the United States after the world’s largest economy saw annual consumer prices increase by 8.5% in the 12 months to March this year, according to AFP news agency. . This is the largest increase since December 1981.

The US government believes that inflation will gradually return to the Fed’s 2% target due to increasing borrowing costs. However, in a statement after wrapping up the two-day meeting, the FOMC still said it would “pay close attention to inflation risks”.

It is quite unusual for Mr. Powell to hold a press conference to speak to the American people.

“Inflation is too high. And we understand the difficulty it can cause,” Mr. Powell said, promising to use all available tools to cool inflation “quickly.”

The Fed chairman acknowledged that higher interest rates also affect people, but “everyone will benefit more if we can get this done (inflation). The sooner, the better.”

To that end, Mr. Powell said “an additional 50 basis points will be discussed in subsequent meetings.” However, he also reassured the public that the Fed is not yet considering a heavier rate hike of 0.75 percentage points.

The Fed’s goal is to create a “soft response” to contain inflation while avoiding a contraction in economic activity, and Mr. Powell thinks this is possible.

With the complicated epidemic situation in China and the war in Ukraine, analysts worry that factors beyond the control of the Fed could undermine this goal and push the US economy into recession.