The Federal Reserve’s Chairman Jerome Powell recently spoke about the current inflation rate in the United States and how it needs to be lowered. Despite positive economic news, Powell is warning that lower economic growth and a lower interest rate may be needed to bring inflation down.
Powell made the statements during a webcast at the Wall Street Journal jobs summit recently. “We don’t want inflation to run too hot and cause an overheating of the economy,” he said. He went on to explain that although progress has been made in increasing the number of jobs, inflation has been rising faster than many analysts predicted.
In 2020, the economy saw its strongest growth in decades with the unemployment rate dropping to 6.4%. Inflation has also been on the rise, with the consumer price index rising to the highest it’s been since 2018.
Powell noted that in order to lower inflation, the Federal Reserve has to adjust its policies to slow economic activity. This means they will need to keep interest rates low and reduce the pace of bond buying. This could lead to lower economic growth as well, but Powell stated that this is necessary to keep inflation under control.
Powell emphasized that although the economy is improving, the high rate of inflation needs to be addressed. In order to do this, the Federal Reserve must be willing to slow economic growth in order to ensure that inflation remains in check. This may mean lower economic growth for the foreseeable future, but it is necessary to ensure that the economy remains stable.