Jerome Powell admitted Tuesday that inflation represents a 'severe threat' to the economy and the Federal Reserve has plans in the works to raise interest rates more than expected if price rises don't level off.
Powell, a Republican who has been nominated by President Biden for another term chairing the Fed, made the admission at a hearing for the confirmation of his second term before the Senate Banking Committee.
'If we have to raise interest rates more over time, we will,' Powell said. The Fed envisions three rates hikes this year, though some economists forecast that four will be needed.
The Fed under Powell has had a higher tolerance for inflation as it pursued a goal of maximum employment over the last year.
The Fed chair was put on defense by Democrats who suggested that raising rates could slow hiring and disproportionately leave lower-income and Black Americans without work. Fed increases lead to higher rates on business and consumer loans, which can slow growth. Powell said he is now more concerned that rampant inflation will have devastating effects on the job market.
Powell, a Republican , has been nominated by President Biden for another term chairing the Fed,
'High inflation is a severe threat to the achievement of maximum employment,' he said.
Powell also said that the economy no longer needs emergency stimulus, but said it would take time for the Fed to get back to pre-pandemic interest rates.
The Fed cut short-term interest rates to near zero and started buying bonds to lower long-term rates in 2020.
'It is really time for us to move away from those emergency pandemic settings to a more normal level,' Powell said. 'It's a long road to normal from where we are.'
Powell promised that the Central Bank under his watch will use its tools 'to prevent higher inflation from becoming entrenched.'
'We know that high inflation exacts a toll, particularly for those
