Will continue to raise interest rates .. the Federal Reserve does not rule out a “recession”

Powell said the pace of future rate hikes will depend on whether and how quickly inflation begins to decline, which the Fed will assess on a “meet by meeting” basis.

The financial official presented a testimony he prepared for the Senate Banking Committee, which he addressed in a semi-annual report of the Fed’s policies to Congress, saying that the decision-making process is based “on the data received and the evolution of the outlook for the economy.”

Powell acknowledged that a rapid rise in interest rates could cause a recession, although that is not what he wanted.

During the hearing, Powell answered a question from a senator who had expressed concern about a recession as a consequence of the bank’s monetary policy, saying, “It’s certainly a possibility. … It’s not the desired effect at all, but it is certainly a possibility.”

Powell’s testimony comes a week after the Fed raised its benchmark interest rate by seventy-five basis points, the highest increase in nearly three decades, to a rate of 1.5 percent to 1.75 percent.

With inflation rising, Fed policymakers also expect a faster pace of rate hikes this year and next than they did three months ago, with the base rate reaching 3.8 percent by the end of 2023. This could be the highest rate in 15 years.

Fears are growing that the Fed, after restricting credit, will end up pushing the country into recession, with inflation at its highest rate in four decades. This week, Goldman Sachs estimated the probability of a recession at 30 percent over the next year and 48 percent over the next two years.

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On Wednesday, Senator Tom Telles, a prominent Republican member of the Banking Committee, accused Powell of taking too long to raise interest rates, and said the short-term rate index should also be much higher.

“The Fed has stuck itself in a series of reactionary policy measures,” Telles continued.

At a press conference last week, Powell indicated that a price hike by half or three-quarters of a percent would be considered at the next Fed meeting in late July.

Both possibilities would exceed a quarter of a percentage point, the level of the Fed’s increase in the past, while the Fed struggles to curb high inflation as quickly as possible.

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