Despite the risk of inflation, Fed Chairman Powell says raising rates is “premature.”
Despite the possibility of continued rising inflation in the United States, Federal Reserve Chair Jerome Powell warned Friday that raising borrowing rates would be “premature” and risk hurting the economy’s recovery.
Supply limitations and shortages, which have prompted dramatic price increases, have been acknowledged by the US central bank president “It will most likely endure longer than previously anticipated, possibly well into next year.
“However, we must be patient at the Fed,” he says “Powell stated this during a panel discussion hosted by the South African Reserve Bank.
He said the Fed is “on pace” to begin tapering its enormous monthly bond purchases, which he expects to be completed by mid-2022.
“However, tightening policy by raising rates now with the effect and goal of dampening job creation would be premature.”
At the central bank’s policy meeting early next month, policymakers are expected to announce a reduction in bond purchases, although the benchmark lending rate is projected to remain at zero until late next year.
Inflation in the United States has been running well above the Federal Reserve’s 2% objective, but Powell believes supply constraints will ease, allowing inflation and wage pressures to subside, which he calls the “most likely possibility.”
Officials, on the other hand, “must keep a close eye on everything.”
If necessary, he has promised that the Fed will act to keep inflation under control.