Powell says Fed 'won't hesitate' to hike interest rates until inflation falls

Federal Reserve will 'keep pushing' to bring inflation down

Federal Reserve Chairman Jerome Powell on Tuesday reiterated his commitment to curbing the highest inflation in decades, indicating the central bank will raise interest rates as high as necessary in order to tame consumer prices. 

"What we need to see is inflation coming down in a clear and convincing way and we’re going to keep pushing until we see that," he said during a Wall Street Journal live event. "If that involves moving past broadly understood levels of neutral we won’t hesitate at all to do that."  


Fed policymakers hiked the benchmark federal funds rate by a half point earlier this month, and Powell has all but promised that two, similarly sized increases are on the table at the forthcoming meetings in June and July. He echoed that sentiment on Tuesday as the Fed races to catch-up with runaway inflation and bring it back down to the 2% target.

In this Jan. 29, 2020 file photo, Federal Reserve Chair Jerome Powell pauses during a news conference in Washington.  (AP Photo/Manuel Balce Ceneta, File / AP Newsroom)

"If the economy performs as we expect then that’s something that will be on the table," Powell said. 

His comments come one week after the Labor Department reported inflation surged higher than expected in April, with prices rising 8.3%, close to a 40-year high. Economists had been hoping for signs that the inflation spike was subsiding in a substantive way; instead, the report underscored how strong inflationary pressures still are in the economy. 

The Fed now faces the tricky task of cooling demand and prices without inadvertently dragging the economy into a recession. Hiking interest rates tends to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut back on spending. Bank of America, as well as Fannie Mae and Deutsche Bank, are among the Wall Street firms forecasting a downturn in the next two years.

Federal Reserve

A man wearing a mask walks past the U.S. Federal Reserve building in Washington D.C., the United States, on April 29, 2020. ((Xinhua/Liu Jie via Getty Images) / Getty Images)

Powell has acknowledged there could be some "pain associated" with reducing inflation and curbing demand but pushed back against the notion of an impending recession, identifying the labor market and strong consumer spending as bright spots in the economy. Still, he has warned that a soft landing – the sweet spot between cooling demand without crushing it and triggering a recession – is not assured.  


Even if the unemployment rate is a "few ticks" higher, he said, the labor market would still be strong. 

"This is a strong economy and we think it’s well positioned to withstand less accommodative monetary policy, tighter monetary policy," Powell said. "There could be some pain involved in restoring price stability -- but we think we can sustain a strong labor market."