This month, most people think that the U.S. Federal Reserve will raise its key interest rate by another 75 basis points.
U.S. Jerome Powell, the head of the Federal Reserve, sent a strong and clear message that the central bank’s job is to quickly bring inflation down.
During a question-and-answer session at the Cato Institute in Washington, D.C., Powell said, “It is very much our view and my view that we need to act now, openly and strongly, as we have been doing.”
His comments were made on Thursday, the same day that the European Central Bank (ECB) raised its benchmark interest rate by 75 basis points, which was the biggest change of this kind in its history.
In spite of all the news, the price of bitcoin (BTC), which is currently trading at $19,200, is still close to a multi-year low.
Powell said that inflation in the U.S. is making “the clock tick,” which means that the Federal Reserve needs to act quickly. The Fed’s rate-setting body, the Federal Open Market Committee (FOMC), will meet again on Sept. 20 and 21. After a string of “hawkish” comments over the past two weeks, most people expect the benchmark Fed funds rate to go up by another 75 basis points.
Powell said, “The longer inflation stays well above target, the more likely it is that the public will start to think that high inflation is the norm.”
As he did in his speech last week at the Federal Reserve annual economic symposium in Jackson Hole, Wyoming, Powell talked about the Fed’s “several failed attempts” to stop inflation in the 1970s. Then-Chairman Paul Volcker finally did something to push for interest rates to go up to very high levels, which put the U.S. into a hard recession. Powell said that he hopes the Fed of today can stop inflation without causing a social cost like this.
Powell echoed what Fed Vice Chair Lael Brainard said on Wednesday when she said that getting prices back to where they should be will take time and hurt the labor market and households. He said that it’s important not to declare victory over prices too quickly.
Powell said, “History strongly warns against loosening policy too soon.” “I can promise you that my coworkers and I care deeply about this project and will keep working on it until it’s done.”
Most of the questions Cato President Peter Goettler asked the Fed chair were about monetary policy, but Goettler also asked about cryptocurrencies and stablecoins.
Powell seemed to dislike unbacked crypto assets, pointing out that they aren’t a good way to save money and that most people don’t want to use them to pay for things. Powell said that stablecoins need to be regulated properly if they are to have the qualities of money, like clarity, transparency, and full reserves.
He said, “I don’t think you want to make money and turn it into just another consumer product that sometimes doesn’t work and sometimes does.”
Powell’s comments about crypto were very similar to what Fed Vice Chair for Supervision Michael Barr said on Wednesday when he talked about how important it is to have more government oversight for crypto activities.