We understand the negative impact of significantly higher inflation on households. Inflation is unpleasant, but the process of reducing it will also be unpleasant. But everyone will eventually benefit from stable prices. This is how the Fed governor justified the vigour with which interest rates were raised.
The Federal Reserve’s Open Market Operations Committee, which is responsible for implementing monetary policy, decided to raise the benchmark interest rate by half a percentage point. The interest rate on government bonds is now set at between 0.75 and 1 percent. The decision to increase the rate was unanimous within the Committee.
More expensive food, fuel and energy
“If you’re an ordinary citizen, you don’t have any extra money to throw around. You will feel it when you buy more expensive food, fuel, energy and similar things. We understand that it hurts,” Fed Governor Jerome Powell said as he announced the most dramatic base rate hike in 22 years.
Price stability
Powell stressed that it was time to restore price stability. “This won’t be pleasant either, but ultimately stable prices are to everyone’s benefit,” Jerome Powell said. And he recalled that inflation in recent months had reached more than three times the Fed’s inflation target of 2 percent a year.
