The Federal Reserve must move faster than it has in the past to rein in high inflation, Chair Jerome Powell said, signaling that sharp interest rate increases are likely in the coming months, beginning at the Fed’s next policy meeting in May.
Federal Reserve Chair Jerome Powell testifies during a House Select Subcommittee hearing on Sept. 23, 2020.
Fed officials had hoped that inflation would mostly fall on its own as supply chain snarls and shortages of items like semiconductors unraveled, but those “expectations have disappointed,” Powell said. Lagarde said the ECB, at its next meeting in June, would decide when to end its program of bond purchases, which are intended to lower long-term interest rates. The Fed completed a similar effort in March. The ECB has set the July-September quarter as a target to stop buying bonds but hasn't been more specific.
In his remarks, Powell said the Fed wants to “expeditiously” raise its benchmark rate to a neutral level, meaning a level that neither encourages nor restrains economic growth. Fed officials now consider a rate of between 2.25% and 2.5% to be roughly neutral. That's 2 percentage points above its current level.
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