The Fed stated that controlling inflation “will take time”

The president of the Fed said that there are risks in case the country falls short with interest rates

The President of the United States Federal Reserve (Fed), Jerome Powell, warned of the risks to the economy in the event of falling short or exceeding interest rates, while warning that the path to returning inflation to the 2 % target will likely “take a while” and be “bumpy,” because monetary policy is not yet restrictive enough.

“Doing too little could allow inflation above the target to become entrenched and, ultimately, require monetary policy to extract persistent inflation from the economy at a high cost to employment,” explained Powell, who also recalled that “Doing too much could unnecessarily harm the economy.”

In a meeting organized by the Economic Club of New York, Powell maintained that the Fed will proceed with caution and will make its next decisions based on the data received, future prospects and the balance of risks. In any case, the president of the issuing institute has stated that the tone of current monetary policy is not restrictive enough.

“I think the data suggests that the policy is not too restrictive at the moment,” he said, although he has acknowledged that there may still be “a substantial tightening” to appear as a result of the delays with which the increases in prices are expressed in interest rates in the economy.

The president of the issuing institute has indicated that, although short-term indicators of underlying inflation have been below 3% during the last three and six months, inflation remains “too high.”

In this sense, Powell stated that it is still too early to know if these readings will mark a downward inflationary trend or, on the contrary, will become entrenched, advocating “potholes” and delays in the process of ensuring price stability.

Likewise, the Fed chair also said that financial conditions have tightened “considerably” in recent months, with long-term bond yields being a “major factor” in this tightening.

“We remain attentive to these developments because persistent changes in financial conditions may have implications for the path of monetary policy,” he summarized.

Source: dpa

(Referential image source: @EconomyStats, X)

Visit our news channel on Google News and follow us to get accurate, interesting information and stay up to date with everything. You can also see our daily content on Twitter and Instagram

You might also like