Powell contemplates raising rates by 50 basis points at once

Jerome Powell, president of the US Federal Reserve (Fed) has an absolutely priority objective at the moment: to put inflation on the line.

In his speech yesterday in Washington at the National Economics Association for Business, Powell made this message very clear, acknowledging that They will take the measures they deem necessary to stop the advance of inflation.n, even if that means contributing to the fall in GDP growth.

At last week’s meeting, the Fed raised rates for the first time in 39 months, laying the foundation stone for a process that will take time. In fact, the Fed increased its expectation of raising rates and now expects an increase in the price of money at each official meeting this year, which would mean six increases of 25 basis points before the start of 2023.

But Powell has not stopped there, and yesterday acknowledged that they do not rule out raising rates by 50 basic points in a meeting, twice as much as usual, if they consider it necessary to fight against the rise in inflation. “If we deem it appropriate that we move more aggressively in raising interest rates, more than 25 basis points in one meeting, or several, we will do so,” he says. “And if we determine that it is necessary to tighten our policies until they are restrictive [que contribuyan a reducir el crecimiento del PIB]We will too,” he explains.

The president of the Fed also made it clear that they will begin to reduce the balance of assets they maintain, above 9 trillion dollars, soon, and although “no decision has been made in this regard”, he acknowledges, he also admits that “a decision in this regard could come as early as May”that is, in the next rate meeting that the Fed will have.

And Powell, in addition, highlights the strength of employment in the US as one of the main causes of the rise in inflation, and does not expect it to soften, with the Fed expecting 3.5% unemployment at the end of the year, from the 3.8% current.