Powell "Strong Action to Control Inflation"... Weight of 3 Consecutive Giant Steps

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), emphasized the need for strong and immediate action to curb inflation on the 8th (local time), reaffirming a hawkish (monetary tightening) stance.

At the monetary policy conference hosted by the Cato Institute in Washington DC, Chairman Powell said, "Our view is that what we do must be straightforward and strong," adding, "We must continue this until we achieve our goals."

This is an extension of his indication of a large rate hike, as he mentioned at the Jackson Hole meeting late last month that "another unusually large rate increase may be appropriate."

Earlier, the Federal Open Market Committee (FOMC) decided at its last two regular meetings to raise the benchmark interest rate by 0.75 percentage points at once, known as a 'giant step.' This statement is interpreted as leaving open the possibility of three consecutive giant steps through the September meeting.

In particular, these remarks drew more attention as recent U.S. inflation indicators have shown signs of slowing. It is almost a rejection of the possibility of slowing the pace raised by some in the market based on easing inflation indicators and concerns about a recession.

At the conference, Chairman Powell once again referred to the inflation situation in the 1970s and the strong measures taken in the early 1980s. He said, "If high inflation is accepted as the norm and expected to persist, it becomes much more difficult to control inflation," expressing concern about entrenched high prices.

He also said, "Labor market demand remains very strong, and employment rates are maintaining high levels," adding, "What we have to do is to prevent this (price increases) from happening." The FOMC will hold a regular meeting for two days starting on the 20th to discuss whether to raise interest rates.