June 27, 2022

Dubai Week

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The fight against inflation is "unconditional" despite the risk of rising unemployment.

The fight against inflation is “unconditional” despite the risk of rising unemployment.

he said Federal Reserve Chairman Jerome Powell, While acknowledging that a sharp rise in interest rates could boost unemployment rates, the central bank’s commitment to curb inflation, which has hit a 40-year high, is “unconditional.”

“We really need to restore price stability because without it we would not be able to maintain periods of maximum employment where the benefits would be so widely distributed,” Powell told the House Financial Services Committee on Thursday. “This is something we have to do, and we have to do.”

Powell pointed out that with the unemployment rate in the United States at 3.6% in May, the central bank’s moves are likely to increase unemployment.

He continued, “We do not have precise control tools, so there is a risk that unemployment will rise to historically low levels. There is still strong labor in the labor market, with the unemployment rate reaching 4.1% or 4.3%.”

But he said the recession, which expects the U.S. economy to grow in the second half of this year after a slow start in 2022, is not inevitable.

Powell’s statements came on the second day of the tough questions he faces in Congress about US “central” efforts to control inflation, which were three times higher than the target rate by the preferred method of measuring “central” value. 2%

On Wednesday, the Senate Banking Committee said the central bank was not trying to create an environment conducive to a recession, but that it was “certainly possible” in light of recent global events, particularly the war in Ukraine and the Kovit-19 epidemic. , Which made it much harder to control inflation without side effects.

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For its part, Federal Reserve Board member Michael Bowman said on Thursday that it would support a 75 basis point interest rate in July, followed by a 50 basis point increase in the “next few” meetings, a tougher approach to monetary policy than most of its central bank. Colleagues.

In turn, economists in a Reuters poll this week said that the US would raise “central” interest rates by 75 basis points next month, followed by a rate hike of up to half a percentage point in September and would not shy away from quarterly moves. Percentage point before November.