US Federal Reserve Board Chairman Jerome Powell questioned after the Federal Reserve raised its target interest rate by 3/4 percentage point to prevent a spike in inflation, during a meeting announced after a two-day meeting of the Federal Open Market Committee. (FOMC) in Washington, June 15, 2022.
Elizabeth Frantz | Reuters
Federal Reserve officials offered strong language on Friday to describe their approach to inflation, promising a formal effort to restore price stability.
In its annual monetary policy report – a precursor to Chairman Jerome Powell’s appearance before Congress next week – the central bank promised that it would do its best to ease ongoing inflationary pressures with fastest rate in more than 40 years.
“The Commission’s commitment to restoring price stability – essential to maintaining a strong labor market – is unconditional,” the Fed said in a report to Congress.
That marked the Fed’s strongest statement yet, affirming its commitment to continue raising interest rates and tightening policy to address the paramount issue of the economy.
The statement doesn’t detail what “unconditional” means.
Earlier this week, the Fed raised its benchmark interest rate three-quarters of a percentage point in a continued effort to slow demand. Market participants worry that a tightening Fed could lead to a recession, although Powell said he still thinks it can be avoided.
That rate hike follows a half-point hike in May. This week was the strongest since 1994.
Along with raising interest rates, the Fed is also taking assets off its balance sheet by $9 trillion by allowing some of the proceeds from the bonds it holds to roll out.
Earlier in the day, Powell himself made a similar statement, saying that he and the rest of the Fed were “deeply focused” on lowering inflation.
