“If we have to raise interest rates more over time, we will,” Jerome Powell said during a hearing of the Senate Banking Committee on Tuesday,
Warning that high inflation could make it harder to restore the job market to full health, Federal Reserve Chair Jerome Powell said Tuesday that the Fed will raise interest rates faster than it now plans if needed to stem surging prices. With America’s households for food, gas, rent, autos and many other items, the Fed is under pressure to rein in inflation by to slow borrowing and spending. At the same time, the economy has recovered enough that the Fed’s ultra-low-interest rate policies are no longer needed. “If we have to raise interest rates more over time, we will,” Powell said during a hearing of the Senate Banking Committee, which is considering his nomination for a second four-year term. The stark challenge for Powell if he is confirmed for a new term, as expected, was underscored by the questions he faced Tuesday from both Democratic and Republican senators. They pressed him to raise rates to reduce inflation, though without ramping up borrowing costs so much that the economy tumbles into a recession. Fed officials have forecast three increases in their benchmark short-term rate this year, though some economists say they envision as many as four hikes in 2022. is expected to be approved by the committee sometime in the coming weeks and then confirmed by the full Senate with bipartisan support. At Tuesday’s hearing, he drew mostly supportive comments from senators from both parties. A Republican by President Donald Trump, Powell has also been credited by many Democrats for sticking with ultra-low-rate policies to support rapid hiring for the past 18 months. In his testimony, Powell rebuffed suggestions from some Democratic senators that rate increases would weaken hiring and potentially leave many people, particularly lower-income and Black Americans, without jobs. Fed rate increases usually boost borrowing costs on many consumer and business loans and have the effect of slowing the economy. But Powell argued that rising inflation, if it persists, also poses a threat the Fed’s goal of getting nearly everyone wants a job back to work. Low-income families have been particularly hurt by the surge in inflation, which has wiped out the pay increases that many have received.
