After a year of rising interest rates, Federal Reserve Chairman Jerome Powell warned businesses that rates could now go even higher than policymakers at the central bank had previously expected.
In remarks to the Senate Banking Committee on March 7, Powell said that faster wage growth and low unemployment levels had the Fed considering additional rate increases to bring the level of inflation back down to a more modest 2 percent. In February, the consumer price index was up 6 percent year-over-year and 0.4 percent compared to January.
“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
The prospect of further interest rate hikes has rankled businesses that are already experiencing higher costs for borrowing. Steve Forbes, chairman and editor-in-chief of Forbes Media and keynote speaker at the 2022 FEDA Annual Conference, said central bankers were “clueless about inflation” in his latest What’s Ahead video series. Forbes questioned the wisdom of slowing the economy over low unemployment, calling past attempts to do so a “blunder.” “Prosperity doesn’t cause inflation,” he said. The full video is available here.