EconomyFed will crack down on inflation to avoid skyrocketing...

Fed will crack down on inflation to avoid skyrocketing social costs, Powell says

The Federal Reserve must continue to act “vigorously” to reduce demand and contain pressure on prices, thus avoiding an inflationary spike like the one registered in the United States in the 1970s and 1980s, Fed Chairman Jerome Powell said on Thursday. .

His predecessor at the time, Paul Volcker, had to take extreme measures against high inflation.

“We need to act now directly, forcefully as we have been doing and we must continue to do so until the job is done to avoid … the skyrocketing social costs” of the Volcker era, Powell said.

The high prices of recent months have triggered annual inflation to its highest level in four decades, which has led the Fed to raise the reference interest rate four times this year and is expected to do so again at the end of the year. of month

Powell acknowledged that they are harsh measures but reiterated that the body must act now to avoid worse consequences in the future.

Annual inflation in the United States rose to 14.8% in early 1980 and remained in double digits until the end of the following year.

Although it moderated in July after a 40-year high in June, it remains high, at 8.5% according to the CPI consumer price index, and at 6.3% according to the Fed’s preferred PCE index.

“Time is short,” warned Powell, who recently admitted that the battle against inflation can be painful for some consumers.

Inflation erodes the purchasing power of American families, in a context of problems in supply chains and, above all, the increase in the price of gasoline after the Russian invasion of Ukraine.

“History offers strong warnings against premature policy easing,” Powell concluded, again tempering expectations of any near-return for interest rates.

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