Federal Reserve Chairman Jerome Powell has signaled central bank policymakers’ commitment to taking US inflation under control, but warned that the methods to do so could prove politically unpopular.
Speaking at a conference held by Sweden's Riksbank on Tuesday, he said that "price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time."
"But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy. The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors," the Fed chief underscored.
He did not comment on where monetary policy may be headed in coming months, only indicating that more increases in interest rates are likely on the way this year. In 2022, the Fed raised interest rates seven straight times to a range of 4.25% to 4.5%, amid growing inflation.
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In separate remarks, Powell commented on calls by some lawmakers to use the Fed’s regulatory powers to address climate change. He pointed out that Fed officials "should 'stick to our knitting' and not wander off to pursue perceived social benefits that are not tightly linked to our statutory goals and authorities."
According to him, "taking on new goals, however worthy, without a clear statutory mandate would undermine the case for our independence." In this vein, Powell made it clear that the Fed will not "be a climate policymaker."
The comments come after Gita Gopinath, a deputy managing director of the International Monetary Fund, said that inflation in the US has not "turned the corner yet" and that it is too early for the Fed to declare victory in the fight on rising prices.
She added that it was important for the Fed to "maintain restrictive monetary policy" until a "very definite, durable decline in inflation" was evident in wages and industries not related to food or energy.
US inflation, as measured by the Consumer Price Index, expanded by 7.7% during the year to October, growing at its slowest pace in nine months after hitting a four-decade high of 9.1% during the 12 months to June.
Despite central bank efforts, inflation remains more than three times higher than the 2% per annum level preferred by the Fed, which has vowed to bring price pressures back to its target.
Both Democrats and Republicans have repeatedly reproached Powell’s Fed over the central bank's role in the inflation crisis.
Former President Donald Trump bashed the central bank when it was raising rates during his administration, once slamming Powell as an "enemy" of the US who allegedly is as bad as China.
While other Republicans accused the Fed of gross oversight for the spike in consumer prices, Democratic Senator Elizabeth Warren, for her part, warned that the rapid rate hikes could lead to "widespread" job losses. President Joe Biden avoided commenting on Fed decisions, noting, however, it is mainly the central bank’s responsibility to grapple with inflation.
Western countries have increased sanctions pressure on Russia since the start of its special military operation in Ukraine on February 24. Disruptions in supply chains have since led to higher fuel and food prices across the EU and the US, driving inflation to record levels and causing cost of living to soar. Last month’s Gallup poll revealed that rising prices cause financial hardship for 55% of US citizens, while 13% say higher prices are causing a severe hardship for their family.