Washington [US]Jan 11 (ANI): US Federal Reserve Chairman Jerome Powell has defended his ongoing policy rate hike, saying restoring price stability, especially when inflation is high, may require actions “that are not popular”.
The US Federal Reserve’s policy rate is now in a target range of 4.25-4.50 percent, the highest level in 15 years, and was notably close to zero in early 2022.
Before the latest increase of 50 basis points, there has been a fourth increase in a row of the order of magnitude of 75 basis points.
Raising interest rates is a monetary policy instrument that usually helps to dampen demand in the economy, thereby helping inflation to fall.
“But restoring price stability when inflation is high may require actions that are unpopular in the short term as we raise interest rates to slow the economy,” Powell said at the Symposium on Central Bank Independence, Sveriges Riksbank, Stockholm, Sweden. the topic “Central Bank Independence and the Mandate – Evolving Views”.
Price stability, he said, is the foundation of a healthy economy and provides the public with “immeasurable benefits” over time.
“The absence of direct political control over our decisions allows us to take these necessary actions without regard to short-term political factors. I think the benefits of independent monetary policy in the US context are well understood and widely accepted,” he added.
On central bank independence and the mandate, which was the theme of the symposium, Powell noted that the argument for independence lies in the benefits of isolating monetary policy decisions from short-term “political considerations.”
Taking his argument forward, he said the central bank should stick to knitting and not wander off to pursue perceived social benefits that are not closely linked to statutory objectives.
The next US monetary policy meeting is scheduled for January 31 and February 1. (ANI)