Array
Federal Reserve Chair Jerome Powell took heat from lawmakers Tuesday after warning that interest rates will need to be raised higher as the central bank continues its fight against inflation.
“The ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said during a hearing held by the Senate Banking Committee.
“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell said.
Higher interest rates are meant to lower prices by slowing economic activity, which can push the economy into a recession and put people out of work.
There are currently about 5.6 million people looking for jobs with a national unemployment rate of 3.4 percent, the lowest in more than five decades, according to Labor Department data.
But if the Fed hits its expected year-end unemployment rate of 4.6 percent, there will be more than 7.6 million unemployed people, based on calculations by The Hill. That’s about two million more people in need of a job.
“[We’re going to have] two million people out of work. Can you stop it at two million people?” Sen. Elizabeth Warren (D-Mass.) asked Powell.
“History suggests that the Fed has a terrible track record of containing modest increases in the unemployment rate.”
Lawmakers in both parties responded with concern to Powell’s more aggressive stance on future rate hikes.
“When you’re slowing the economy, you’re trying to put people out of work. That’s your job, is it not?” Sen. John Kennedy (R-La.) said to Powell during the hearing.
“You’re trying to raise the unemployment rate,” he continued.
The Fed’s baseline interest rate is 4.57 percent after the central bank boosted the overnight bank borrowing rate to a span of 4.5 to 4.75 percent. Fed officials expected to boost that rate to 5.1 percent by the end of this year, according to their latest projection released in December.
But that terminal rate is now expected to be higher and will be updated at the Fed’s rate-setting Federal Open Market Committee (FOMC) meeting later this month.
