Jerome Powell in favor of a faster Fed rate hike

Posted Apr 21, 2022, 8:07 PM

The Fed is moving towards a faster-than-expected rate hike. For Jerome Powell, it would indeed be “appropriate to move a little faster. The Chairman of the Federal Reserve, who was speaking alongside Christine Lagarde during a debate at the International Monetary Fund, confided that “a hike of half a point is on the table for the next meeting of the committee. monetary policy, in May. »

This was his last public intervention before this meeting of the Fed, scheduled in less than two weeks, May 3 and 4. And the latest sign that the Federal Reserve is ready to step up on the inflation front. “Our absolute priority today is to restore price stability. We need it to ensure market stability, for the health of our economy. So we’re going to do it,” added Jerome Powell, who clarified that during the last US monetary policy tightening cycle, inflation was not as high. “It won’t be easy, it will be a challenge, but we will do everything to get there. »

Resist political pressure

Earlier on Thursday, the Fed Chairman had stressed the need for monetary policy to be completely independent of political pressures. Paying tribute to former Fed Chairman Paul Volcker in front of the NGO that bears his name, he described how his predecessor had been able to “refuse political oscillations” to stay the course of his objectives: the fight against inflation. A way of reminding, for some, that he will not give in to the temptation to sacrifice the fight against inflation on the altar of growth.

At the last meeting of the monetary policy committee, the Fed opted for caution by raising its rates by a quarter of a point . Jerome Powell then spoke of the uncertainties of the international context, nevertheless affirming: “If inflation shows that it is necessary to raise rates more quickly, we will do so. »

Inflation at its highest in 40 years

Since then, inflation has persisted, even reaching 8.5% at an annual rate in March, a new record for more than 40 years. American households are beginning to feel the rise in prices on their purchasing power, particularly on prices at the pump and on food. And the voices multiplied to call on the Fed to act quickly and strongly. The latest is that of John Williams, who is part of Jerome Powell’s inner circle. A half-point rate hike is “a very reasonable option” for the next meeting, the New York Fed president and vice chairman of the Fed’s monetary policy committee said last week.

Several other members of the committee had already taken a position for a substantial increase of half a point, which would be the first of its kind since 2000. This was particularly the case of the president of the Fed of Saint Louis, James Bullard, who had already voted for a half-point hike in March – he was the only one then. The situation has since changed and the Fed does not seem to want to waste any more time.

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