Fed chair aims to restore price stability

The President of the Federal Reserve (Fed) from United States, Jerome Powell, anticipated, this Wednesday, March 22, that, as a consequence of the recent bank crisis, the rate increases dand interest may not be adequate to contain inflation.

(See: The Fed raises interest rates in the United States to 4.75% – 5%).

“Instead, we now anticipate that some additional policy firmness may be appropriate.“, said Powell in a press conference after the Fed announced an interest rate hike of 0.25 points, to a range rate of 4.75% and 5%.

Asked about the difference between a future rate hike and a policy tightening, Powell indicated that the focus should be on the word “power” as opposed to the rate hikes that have so far been “ongoing” in the central bank.

Despite the banking crisis, he stressed that the Fed remains “committed” to achieve a drop in inflation to the target of 2%. In this sense, he explained that reducing inflation will require a period of growth “below trend” and a moderation of labor market conditions.

(See: The ‘moral hazard’ that bank bailouts like the SVB would generate).

“Restoring price stability is essential to pave the way for maximum employment and stable prices in the long run.“, warning.

The Fed opted to raise rates by a quarter of a point, after the bankruptcy of two banks in recent weeks, Silicon Valley Bank (SVB) and Signature Bank, whose financial situation worsened due to the organism’s monetary policy, and the rescue of a third party to the First Republic Bank.

The panic also crossed the Atlantic and almost finished with the Swiss bankor Credit Suisse, which finally had to be acquired over the weekend by its competitor UBS after the crisis of confidence that was sinking its price on the market.