- The Fed chairman made public comments for the first time after the Fed raised interest rates by 75 basis points, the biggest increase since 1994.
- The Federal Reserve’s strong commitment to our price stability mandate contributes to widespread confidence in the dollar as a store of value.
- Powell told a news conference that another 75 basis-point increase is likely in July, though he also did not rule out a 50-point increase.
- Fed official’s project rates will rise to 3.4% by December and 3.8% by the end of 2023.
Federal Reserve Chairman Jerome Powell spoke for the first time after the Fed raised interest rates 75 basis points last Wednesday in the biggest increase since 1994.
In a press conference, Powell reaffirmed his goal of lowering the highest inflation in 40 years (8.6%) and affirmed that the Central Bank’s commitment is to encourage the world to maintain and carry out transactions in dollars.
“My colleagues and I are very focused on bringing inflation back to our 2% target. The Federal Reserve’s strong commitment to our price stability mandate contributes to widespread confidence in the dollar as a store of value.”
Powell.
At the Fed’s next meeting in July, Powell said another 75 basis-point hike is likely next month, though he did not rule out a 50-point move.
Against this backdrop, Fed officials are projecting rates to rise to 3.4% by December and 3.8% by the end of 2023. That was a big improvement over the 1.9% and 2.8% they noted for their March estimates.
The Fed chief will now have to face the risks of a possible recession and stagflation, although Powell stressed that the Central Bank has the capacity to meet its objectives of maximum employment and stable prices.
“The Fed’s commitment to both our dual mandate and financial stability encourages the international community to hold and use dollars,” he commented, on the other hand.
He also highlighted the role that the Fed’s liquidity swap lines and its permanent repo facility play in making it easier for foreign central banks to gain access to dollars in times of stress: “Both facilities enhance the dollar’s position as the dominant global currency.“, hill.
