Powell: The Fed is determined to reduce the US inflation rate and will not hesitate to continue raising interest rates until inflation falls

At 2 p.m. EST on Tuesday, Federal Reserve Chairman Powell was interviewed by The Wall Street Journal on the outlook for the U.S. economy and its impact on the labor market, inflation and central bank policy.

The U.S. Senate confirmed last week that Federal Reserve Chairman Powell had won re-election, meaning the government recognizes his performance during the COVID-19 pandemic and the Fed's interest rate hikes to combat inflation.

Powell said in an interview on Tuesday that the Fed is moving quickly to fight inflation, which is at a 40-year high. Powell emphasized his determination to reduce inflation and said he would support raising interest rates until prices begin to fall back to healthy levels.

“We’re going to keep going until we feel that financial conditions are in the right place and we see inflation coming down,” he said in the interview. “We’re going to go there and we’re not going to hesitate about it.”

The Fed has raised interest rates twice this year, most recently by half a percentage point earlier this month, and officials have signaled that the current economic outlook will justify rate hikes at least at the Fed’s next two policy meetings.

Powell said a similar 50 basis point rate hike could occur at subsequent meetings as long as economic conditions remain similar to what they are now.

Powell hopes the Fed can curb high inflation without weighing down the economy. The Fed expects inflation to fall later this year as supply chain disruptions ease and more workers return to the labor market.

Data released by the U.S. Department of Labor on May 11 showed that the U.S. consumer price index rose 8.3% in the 12 months ending in April, slightly lower than the 8.5% increase in the 12 months ending in March.

While financial conditions have tightened after some Federal Reserve officials said they want to raise interest rates to a neutral level by the end of the year, domestic demand remains strong.

“This is a strong economy, and we think it’s well positioned to withstand both accommodation and tightening of monetary policy,” Powell said. “There may be some pain in restoring price stability, but we think we can sustain a strong labor market.”

The S&P 500 is down about 15% from its January peak, while the yield on 10-year government bonds is around 2.96%, up from 1.5% at the start of the year.