Fed chief Jerome Powell pivots to 50 basis point interest rate hikes

US Federal Reserve Chairman Jerome Powell outlined his most aggressive approach to tackling inflation yet, potentially approving interest rate hikes of two or more half percentage points while outlining the market work as overheated.

“I would say 50 basis points will be on the table for the May meeting,” Powell told an IMF-hosted panel Thursday in Washington that he shared with European Central Bank President Christine Lagarde. , and other officials. He said the demand for workers is “too hot – you know, it’s unsustainable”.

The head of the Fed is directly targeting the strong demand that the central bank wants to calm.

It’s a strategy that carries considerable risk for American workers and the economy’s overall growth prospects in the months ahead, as well as for the Fed itself in a year of midterm congressional elections. , with inflation being a major concern for ordinary Americans.

“It’s going to be very difficult to know whether or not we’ll have a recession,” said Ethan Harris, head of global economics at Bank of America Securities. “They need to get monetary policy into restricted territory, and they probably need some sort of increase in the unemployment rate.”

Powell also reinforced expectations for another half-point hike in June, citing minutes from last month’s policy meeting that many officials noted that “one or more” 50-point hikes basis points could be appropriate to rein in the highest inflation in four decades. “There’s something about the idea of ​​front-loading ‘moves if any,’ Powell said — “so that’s pointing in the direction of 50 basis points being on the table.” Investors are betting on half-point increases in May, June and possibly July. Rising yields in turn destabilized the stock market, with the S&P 500 index closing down 1.5% on Thursday.

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