With higher interest rates, the Fed boss wants to fight the currently high inflation in the USA.
(Photo: dpa)
Washington Despite fears of a recession on the financial markets, the US Federal Reserve is determined to keep inflation in check with tight interest rates. “Strong and emphatic” action is required, Fed Chair Jerome Powell said at a conference in Washington on Thursday.
The Fed’s task is not yet complete. At the same time, he dampened expectations that the Fed could loosen interest rate restraints in the near future. History serves as a cautionary tale not to ease monetary policy prematurely. The Fed is committed to fighting inflation and will not be swayed by political considerations, Powell said.
In the United States, midterm elections are due in November, in which President Joe Biden’s Democrats could lose their narrow majorities in the House of Representatives and Senate. Among other things, leading Republicans have accused Biden of ignoring the country’s high inflation rate of 8.5 percent.
According to Powell, the Fed assumes that the fight against inflation will not come with the very high “social costs” associated with it, as was the case in the 1980s.
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The Fed recently raised the key interest rate by an unusually large amount of 75 basis points twice in a row – to a range of 2.25 to 2.50 percent. She wants to follow up at the meeting on September 21st. She wants to make her course dependent on the data situation and is looking in particular at inflation and labor market data. Powell said the demand for labor in the labor market is “very, very strong.”
The job market continues to boom, even if economic output has recently contracted for two quarters in a row. Last month, 315,000 new jobs were added, even as unemployment rose slightly to 3.7 percent.
However, the Fed is very concerned about high inflation. Investors are watching the consumer price data for August, which is due out on Tuesday, with great interest, as they may be of crucial importance in terms of the level of the Fed’s next rate hike. The markets are concerned that the central bank could stall the economy with a course that is too tight and plunge it into a recession.
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