Federal Reserve Chairman Jerome Powell declared Tuesday that the economy is both healthy enough and in need of tighter monetary policy.
Higher interest rates control inflation by slowing down the flow of money, which has been running rapidly through the economy as the Fed and Congress have combined to provide more than $10 trillion worth of stimulus.
"If we see inflation persisting at high levels longer than expected, then if we have to raise interest more over time, we will," Powell said."We will use our tools to get inflation back.", which have added more than $4.5 trillion to its balance sheet since the early days of the pandemic.
He faced some questioning about why the Fed got its inflation call wrong, and he again cited issues mostly related to the pandemic, which has seen clogged supply chains, sparsely stocked store shelves and rising prices that Powell said could threaten the recovery. "If inflation does become persistent, if these high levels of inflation get entrenched in our economy and people's thinking, then inevitably that will lead to much higher monetary policy from this," he said."That could lead to a recession and that will be bad for workers."
Powell also faced questions about a controversy in recent months over the financial activities of several officials around the time the Fed was about to implement a series of rescue measures just before the pandemic declaration.
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