October 6, 2022

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Jerome Powell: "There is plenty of room to raise US interest rates without hurting the labor market."

Jerome Powell: “There is plenty of room to raise US interest rates without hurting the labor market.”

Federal Reserve Chairman Jerome Powell said at a press conference that interest rates in the United States will not change in the near future. Thus, the main rate is still in the range of 0-0.25 percent.

However, the situation may soon change. In light of the remarkable progress we have witnessed in the labor market and the labor marketInflation, which is well above our long-term target of 2%., the economy no longer needs constant support for monetary policy at a high level, ”- the head of the Federal Reserve noted.

He then added, “This is why we are withdrawing our asset purchases, and we anticipate that it will soon be necessary to raise the target range for the Fed funds rate. Of course, the economic outlook remains highly uncertain. Following an appropriate monetary policy in this environment requires humility. Because we are seeing the economy develop in unexpected ways.”

The Fed restricts stock purchases

As of February, the Federal Reserve will be Increase its holdings of treasury bonds by at least $20 billion per month. And Mortgage-backed securities of at least $10 billion per month.

“When deciding to reduce our balance sheet, we are guided by our objectives of maximum employment and price stability. Accordingly, we will be prepared to adjust every detail of our approach to balance sheet management in light of economic and financial developments,” the Federal Reserve Chair.

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See also: A new wave of inflation. “The prices will go up, but much slower.”

How will US interest rates change?

“To provide more clarity about our approach to reducing the size of the Federal Reserve’s balance sheet today, the Committee issued A set of guiding principles that will form the basis of our future decisions. These rules make it clear that the federal funds rate is our main way of adjusting our monetary policy, and that the reduction of our balance sheet will occur after the start of the rate hike process – the Fed chair said.

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Powell announced that the cuts will occur in a predictable manner over time, primarily through corrections through reinvestment. “Over time, we intend to hold securities in the amounts necessary to operate our large reserve, and In the long term, we expect to mainly hold treasury notes– added.

To answer the question of whether the Fed can raise interest rates, Powell said at each subsequent meeting:It is impossible to predict with certainty which path of the foot will be the correct path. At the moment we have not made any decisions on the course of policy and I stress that we will be modest and flexible about it, moving through the various opposing currents, risks are now directed in both directions.”

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“I would like to add that we will be guided by data (…) and changing perspectives” – he added.

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