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Fighting inflation essential, Fed chief Powell says

2022-06-22 HKT 23:22
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  • Jerome Powell addresses lawmakers in Washington. Photo: AFP
    Jerome Powell addresses lawmakers in Washington. Photo: AFP
The Federal Reserve is "strongly committed" to bringing down inflation that is running at a 40-year high and policymakers are acting "expeditiously to do so," US central bank chief Jerome Powell said on Wednesday.

"It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all," Powell said at a hearing before the US Senate Banking Committee, adding that the central bank in coming months will be looking for "compelling evidence" of easing price pressures.

Inflation continues to run well above the Fed's targeted level of 2 percent. A gauge of price increases that excludes volatile food and energy costs may have flattened out or eased somewhat last month, Powell testified, but Russia's Ukraine war and Covid-19 lockdowns in China are putting continued upward pressure on inflation.

One week ago, the Fed raised its benchmark overnight interest rate by three-quarters of a percentage point – its biggest hike since 1994 – to a range of 1.50 percent to 1.75 percent, and signaled rates would rise another 1.75 percentage points this year.

That steep rate hike path, designed to slow the economy, has sparked widespread concern about a recession and a weakening of labour markets.

To the Senate committee on Wednesday, Powell pledged an "overarching focus" on bringing down inflation and reiterated that ongoing increases in the Fed's policy rate would be appropriate, with the exact pace dependent on the economic outlook.

"Inflation has obviously surprised to the upside over the past year, and further surprises could be in store," he said, adding that policymakers would need to be "nimble" in response to the incoming data.

"The American economy is very strong and well positioned to handle tighter monetary policy," he said. (Reuters)