News The Fed's Inflation Fight is 'Unconditional' - Powell Says

The Fed’s Inflation Fight is ‘Unconditional’ – Powell Says

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Fed Chair Jerome Powell has pledged to ‘unconditionally’ fight inflation in the run-up to the Fed’s next meeting on June 23. That’s not a very nice way to describe the current state of affairs, but it’s what the markets are facing today. The Fed has raised interest rates three times since September and now expects to increase rates a total of eight times before the end of the year. Then, it will raise rates another 75 basis points over the next few months. Most policymakers expect rates to reach 3.4% by the end of 2018.

As the world’s largest economy continues to struggle to recover from its economic crisis, Jerome Powell’s testimonies to Congress are providing a clearer picture of his goals and the state of the economy. Powell has repeatedly said that the Fed’s commitment to fighting inflation is ‘unconditional’. Powell also reiterated that the Fed is prepared to sell its mortgage-backed securities holdings if they’re necessary to combat the current high inflation.

As the economy continues to struggle with the recovery, the Federal Reserve is ramping up its efforts to reduce inflation. Last week, the Fed raised its benchmark overnight interest rate by three-quarters of a percentage point, indicating that the policy rate would be a little over three trillion dollars by June 23 2022. The Fed’s goal is to have this balance sheet trimmed to $2.5 trillion, or even lower.

When the Fed raises rates again, it might be prudent to take a more cautious stance. Many traders are betting that the Fed’s next hike won’t reach 3%, despite the fact that the market is still pricing in that possibility. The risk of recession is very low, but that doesn’t mean the Fed should give up on the fight against inflation. It’s a far better bet than hedging for a recession – he’s a year away.

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