Inflation continues to be at record highs and the Federal Reserve has decided to slow down growth of the economy by raising interest rates. The Federal Reserve is willing to risk high unemployment and a possible recession in order to get inflation back under control.
Federal Reserve Chairman, Jerome Powell, spoke this week at a news conference acknowledging that the “soft landing” which ideally would slow growth of the economy enough to curb inflation but avoiding a recession, is looking less and less likely.
With the Fed raising the cost to borrow, “the chances of a soft landing,” Powell said, “are likely to diminish. No one knows whether this process will lead to a recession or, if so, how significant that recession would be.”
Powell discussed the guidelines in which the Fed’s policymakers would consider stopping the rate hikes such as continued slow growth, a small increase to the unemployment rate and “clear evidence” the inflation rate is moving closer to the 2% goal.
“We have got to get inflation behind us,” he said. “I wish there were a painless way to do that. There isn’t.”
After the interview, the Fed policymaking committee raised the rates by another three-quarters of a point, making it’s third straight rate hike in row.
Fed officials are still forecasting more large rate hikes until we see a significant decrease in the inflation rate.
These rate hikes are similar to those of other major central banks across the globe. The European Central Bank raised its benchmark rate by three-quarters of a point last week. The Bank of Canada, The Bank of England, and The Reserve Bank of Australia have all followed the same course by significantly raising rates in an attempt to curb inflation.