WASHINGTON – The Federal Reserve must continue to act “strongly” to cool demand and contain price pressures to avoid a repeat of the inflation surge the US economy suffered in the 1970s and 1980s, Fed chair Jerome Powell said today.
His predecessor from that era, Paul Volcker, had to take extreme measures because high inflation had become entrenched.
“We need to act now forthrightly, strongly as we have been doing and we need to keep at it until the job is done to avoid ... the kind of very high social costs” of the Volcker era, Powell said.
With soaring prices in recent months pushing annual inflation to the fastest in four decades, Powell’s Fed has raised the benchmark lending rate four times this year, with a third massive, three-quarter point hike possible later this month.
Powell has acknowledged that the aggressive campaign could cause some pain, but he has stressed repeatedly that acting now will prevent more damaging consequences down the road.
US annual inflation spiked to a painful 14.8% in early 1980 and didn’t fall into single digits until late the following year.
“The clock is ticking,” Powell warned.
And, he said, “history cautions strongly against prematurely loosening policy,” once again dousing hopes the central bank might cut interest rates next year as the economy slows. – AFP, September 8, 2022
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