Highlights

  • Fed Chairman explains lower growth, higher inflation outlook
  • Unemployment expected to rise as cost of money pulls demand lower

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Watch Fed Chief Powell get quizzed! Can rate hikes really reduce inflation?

'Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common.'

Federal Reserve Chairman answered tough questions as he laid out the roadmap for hikes over the next year. Jerome Powell walked back from his May meeting statement where he ruled out a 75 bps hike to make room for many more hikes as inflation continues to be stubborn with no sign of abating. The Fed Chief acknowledged that with rate hikes come the risks of higher unemployment and pain for the common man. Here is an edited transcript of the press conference-:

Coming out of our last meeting in May, there was a broad sense on the Committee that a 1/2 percentage point increase in the target range should be considered at this meeting if economic and financial conditions evolved in line with expectations. We also stated that we were highly attentive to inflation risks and that we would be nimble in responding to incoming data and the evolving outlook. Since then, inflation has again surprised to the upside, some indicators of inflation expectations have risen, and projections for inflation this year have been revised up notably. In response to these developments, the Committee decided that a larger increase in the target range was warranted at today’s meeting. This continues our approach of expeditiously moving our policy rate up to more normal levels. And it will help ensure that longer-term inflation expectations remain well anchored at 2 percent

Overall economic activity edged down in the first quarter, as unusually sharp swings in inventories and net exports more than offset continued strong underlying demand. The median projection in the SEP for the unemployment rate rises somewhat over the next few years, moving from 3.7 percent at the end of this year to 4.1 percent in 2024, levels that are noticeably above the March projections.

Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy. Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common. From the perspective of today, either a 50 or 75 basis point increase seems most likely at our next meeting. We will, however, make our decisions meeting by meeting, and we will continue to communicate our thinking as clearly as we can. Our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored

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