Powell: Fed may raise interest rates more times to combat high inflation

Xinhua News Agency, Washington, January 11 (Xinhua ) U.S. Federal Reserve Chairman Powell said on the 11th that the Federal Reserve may raise interest rates more times and reduce its balance sheet earlier and faster to cope with the continued high inflation in the United States.

Powell said at a nomination hearing held by the U.S. Senate Banking Committee that day that if high inflation in the United States lasts longer than expected and if the Fed has to raise interest rates more times over time, "we will do so." He said that the U.S. inflation rate is currently far higher than the 2% target set by the Fed, which shows that the U.S. economy no longer needs the support of highly loose monetary policy, and the Fed will use its policy tools to prevent high inflation from becoming more stubborn.

Powell said that the normalization of the Fed's monetary policy will be a long process. First, the Fed will end its asset purchases in March this year, then raise interest rates this year, and may begin to reduce its balance sheet later this year.

Powell said that compared with the last time the Fed tightened monetary policy, the U.S. economic situation is completely different and the balance sheet is larger. Therefore, the Fed will reduce its balance sheet earlier and faster this time, and the interval between ending asset purchases and starting to reduce the balance sheet will be shorter.

The minutes of the Federal Reserve's monetary policy meeting in December last year released last week showed that against the backdrop of a strong U.S. economy and rising inflation, the Fed may raise interest rates ahead of schedule and start the process of reducing its balance sheet. Most Fed officials expect three rate hikes this year. Goldman Sachs and other Wall Street institutions recently predicted that the Fed will raise interest rates four times this year. Data shows that the current size of the Fed's balance sheet exceeds $8.7 trillion.

Last November, US President Biden nominated Powell to serve as chairman of the Federal Reserve for another term, and nominated Fed Governor Lael Brainard as vice chairman. Both nominations need to be approved by the Senate.