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Jerome Powell, inevitable?

Jerome Powell, the chairman of the Fed, will therefore speak this afternoon before the banking committee of the United States Senate, before a similar hearing…

(Boursier.com) – Jerome Powell, the chairman of the Fed, will therefore speak this afternoon before the US Senate Banking Committee, before a similar hearing before the House of Representatives tomorrow Thursday. He will of course be questioned about the Fed’s response to record inflation. Recall that the Fed proceeded with a rate hike of 75 basis points last week, raising its federal funds rate between 1.5 and 1.75% in order to counter inflation. Fed officials have also set an aggressive course of rate increases for the rest of the year. New economic projections released after the agency’s two-day meeting last week showed policymakers expected interest rates to hit 3.4% by the end of 2022, which would be the highest level since 2008.

Some comments from the Fed have already emerged in recent days following the FOMC’s decision last Wednesday to hike rates by 75 basis points. Explaining her dissent, Kansas City Fed President Esther George (voting member), who would have preferred to stick with a half-point tightening, said a 75bp move added political uncertainty given the simultaneous start of central bank balance sheet reduction. She notes that inflation has shown no signs of slowing down, but adds that policy changes affect the economy with a lag.

In a blog post, Neel Kashkari (non-voting) of the Minneapolis Fed said he supported the 75 basis point move and could support another 75 basis points in July, but indicated that the uncertainties the cautioned about greater anticipation. He said he could look at a 50 basis point hike per meeting until inflation is on track to hit 2%.

In an academic presentation, James Bullard (voting member) of the St. Louis Fed said that the Fed has…considerable credibility, which he said would suggest that a soft landing is possible if the policy change is well executed. Fed Governor Christopher Waller said in a speech that he would support another 75 basis point hike if the data comes out as expected.

Voting member Loretta Mester of Cleveland finally told CBS Face The Nation that the bank was looking at monthly data for signs of moderating demand, noting May CPI data was bad across the board, and also expecting a return to 2% inflation to take a few years.

Like President Joe Biden, Treasury Secretary and ex-Fed boss Janet Yellen believes recession is not inevitable, but inflation is too high. In an interview with ABC, the Treasury Secretary discussed growth and inflation, noting that recession was therefore “not at all inevitable”, as the Fed takes increasingly aggressive measures . She expects US growth to slow in a natural transition to steady, stable growth, and thinks Jerome Powell can achieve his goal of reducing inflation while maintaining a strong labor market.

This inflation is “unacceptably high”, judges Yellen, who notes that President Biden’s top priority is to bring it down. She finds that “the impacts of energy prices actually represent half of inflation”. She also discusses the efforts of the Biden administration to stem further increases in oil prices. Asked about calls in Congress for gas tax exemptions, she replies that Biden wants to ease the burden on households and that is indeed an idea “to consider.” She also says the administration is considering lifting some Donald Trump-era tariffs on Chinese goods…

While the latest US inflation figures showed a record price increase of 8.6%, to a 41-year high, it should be noted that British inflation announced this morning also accelerated in May to reach its highest level. high since March 1982 with soaring food prices. According to the ONS, Britain’s consumer price index rose 9.1% year on year last month, in line with expectations, from 9% in April. This is currently the highest rate for a G7 member country, which further complicates the already delicate work of the Bank of England. Finance Minister Rishi Sunak said the British government was doing everything possible to combat the price spike. The BoE said last week that inflation should remain above 9% over the next few months before peaking at over 11% in October.

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