“We are heavily committed to bringing inflation down, and we are moving fast.” The president of the Federal Reserve immediately sends his message to the senators of the Banking, Housing, and Urban Affairs commission. His six-monthly hearing in Congress is an opportunity for him to reiterate that, at this stage, the priority objective concerns the dynamics of prices. Also because, he added, “further surprises could be in store”, to the point that the pace of rate hikes could be accelerated.
Economic activity appears to be buoyant, and this allows the Federal Reserve to focus on containing the cost of living. “Consumer spending remains strong,” said Powell, and the labor market remains robust: “Unemployment is close to a 50-year low, vacancies are at historic records, employment has grown at a rate of 408,000. jobs per month ». Progress is also “far-reaching”, with “very strong demand for labor”, which is accompanied however – and this can be a problem for those tasked with keeping inflation under control – a “limited supply (Wages may rise beyond productivity). It is also true that investment has slowed, Powell added, and so has construction activity: it is an effect, however, of higher interest rates.
The problem is therefore high inflation. “It imposes considerable difficulties, especially for those who are less able to cope with the higher costs of essential goods such as food, housing, transport.” Rates will therefore continue to rise, at a pace – Powell confirmed – which will depend on incoming data, but which could accelerate, he added at a later time, based on the most recent data. Also because «having an appropriate monetary policy, in an uncertain environment, requires the recognition of the fact that the economy often evolves in unexpected ways. Inflation certainly surprised upwards last year and other surprises could be in store ». The Fed is also aware that it must “avoid adding uncertainty”, but continues to exclude – in fact – forms of forward guidance that can better shape expectations.