Despite the risk of recession, central bankers have been vocal about the need for further rate hikes to bring inflation down to their 2% target.
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Federal Reserve Chairman Jerome Powell and senior central bank presidents have signaled that further rate hikes are imminent due to continued strength in the country's labor market.
Powell made the statement at the ECB’s Central Bank Forum in Portugal on June 28. The panel included Bank of England Governor Andrew Bailey, Bank of Japan Governor Kazuo Ueda, and ECB President Christine Lagarde.
Central bankers have been vocal about the need for further rate hikes to get inflation down to their 2% target, despite concerns that such increases would lead to a sharp economic slowdown.
Lagarde said:
“I think we have to be as persistent as if inflation persists… We have to be resolute, decisive and resolute in achieving the targets that we set, rather than debating the targets as we go into the race.
Powell and Bailey echoed that sentiment, saying the "strong" job market warrants further policy tightening to keep very high inflation in check. Ueda, on the other hand, said the job market's growth doesn't necessarily warrant further rate hikes at this point.
The US may raise interest rates sharply
Powell said rate hikes could be aggressive if the data showed they were necessary because the top priority for central banks, including the Fed, is to control inflation and get it down to 2%.
He added that tightening has not peaked yet and there is still room for further rate hikes to ensure inflation falls. The Fed Chairman said:
“The bottom line is, the policy hasn’t been restrictive enough for long enough.”
The Federal Reserve raised interest rates for three consecutive quarters starting in March 2022 and only stopped assessing the impact in June.
Based on the Fed's previous comments at the latest FOMC meeting, the market had been expecting the pace of rate hikes to slow down to alternate meetings. However, Powell's latest views on inflation suggest that he will continue to raise rates at the upcoming meeting.
He added:
"You know, I don't act in consecutive meetings."
At the same time, economists believe that these rate hikes will have a delayed impact on the economy, with the effects yet to be felt in the form of a severe recession. #欧盟 #美国 #央行 #通胀 #加息