On Thursday, he said that slowing inflation to the Fed's 2% annual target — from its current 6.6%, according to the central bank's preferred measure — “will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels.”
Europe's economies are suffering from high inflation, exacerbated by Russia's invasion of Ukraine and the resulting spike in natural gas and oil prices. Europe has been far more dependent on Russian energy supplies than the United States has been.
China's strict COVID lockdown policies have shut down ports, hindering exports and slowing consumer spending in cities like Shanghai, where millions of Chinese have been largely restricted to their homes for weeks.
In his interview with NPR, Powell also seemed to suggest that the Fed would at least consider raising its benchmark rate by an extremely large three-quarters of a point if inflation failed to show signs of easing in the coming months. Last week, the stock market initially soared when Powell appeared to take a three-quarter-point rate hike off the table.
After repeating his comment from last week that half-point hikes were likely at each of the next two Fed meetings, in June and July, Powell added Thursday: “If things come in better than we expect, then we’re prepared to do less. If they come in worse than when we expect, then we’re prepared to do more.”
When asked if “do more” meant a three-quarter point hike, Powell said: “You’ve seen this committee adapt to the incoming data and the evolving outlook. And that’s what we’ll continue to do.”