During a press conference, Jerome Powell estimated that it will take slow growth to bring inflation back to pre-crisis levels.
Rates are expected to rise further. After the new 75 basis point hike announced on Wednesday, the Fed’s key rates are likely to rise again in 2022.
While inflation and wage increases remain high across the Atlantic, the Fed chairman assured at a press conference that the financial institution will continue to tighten its monetary policy until inflation has slowed .
The Fed is “firmly committed to bringing inflation back to 2% and will remain so until the job is done”, said Jerome Powell, after the meeting of the monetary policy committee, the decision-making body of the Fed. the Fed, which raised rates again by three-quarters of a percentage point.
He also warned of the risks that could be posed by “premature easing of monetary policy”.
“There is no room for complacency on inflation, hammered Jerome Powell. Over the next few months, we will be on the lookout for indisputable evidence of the ebb of inflation […] At some point, we will slow the pace of rate hikes.”
“No painless method”
But in the meantime, the boss of the American Reserve expects to increase them again in 2022 and assumes the consequences that these successive increases will have on the American economy.
“We believe that to bring inflation down, it will take a slowdown in the labor market and growth below potential, admits Jerome Powell. I do not know the probability of a recession, it is very likely that we will have a period much lower growth.
“We need an increase in unemployment, a slowdown in the market,” even assured the President of the Fed.
The Fed now anticipates almost zero growth for 2022 (+0.2%) against 1.7% forecast in June. It is revising its forecasts downwards for the years to come with 1.2% in 2023, 1.7% in 2024 and 1.8% in 2025. Unemployment which is at its lowest today for 50 years (3.7%) could rise again to reach 4.4% in 2023.
“There is no painless way to bring inflation down,” concludes Jerome Powell.
