Philip Jefferson, one of the Federal Reserve’s three newest governors, has re-emphasized the central bank’s plans to continue fighting inflation.
The former university professor said he and his colleagues are committed to taking “further necessary steps” to address the problem, giving no indication they are considering accommodative monetary policy in the near term.
The Fed will stay the course
The governor handed over his remarks at a conference in Atlanta hosted by three of the Fed’s district banks on Tuesday. It was his first speech since taking office in May.
“During my short time on the Federal Open Market Committee, we have acted boldly to address rising inflation, and we are committed to taking the necessary steps,” Jefferson said.
Jefferson’s entry into the council was followed by three consecutive 75 basis point rate hikes by the central bank in June, July and September. This has brought their policy rate to a range between 3.0% and 3.25%. These rate hikes are historically fast, but the central bank intends to keep raising rates until it reaches a “final rate” of 4.5% to 4.75% next year.
In his speech, the new official reiterated President Jerome Powell’s comments that the US economy will have to endure “below trend growth” for some time to control inflation. The annual CPI was 8.3% in August, down from 9.1% in June, but still at 40-year highs.
Despite being well above the Fed’s target range of 2%, Jefferson promised that he and his colleagues would “get inflation down to 2%.”
After months of tight monetary policy, the biggest voices in business, politics and finance are starting to worry about the Fed’s firm commitment to raising rates.
On Monday, a report from the United Nations called on central bankers around the world to “reverse course” by expanding liquidity and debt relief, or risk triggering a “debt crisis” in many developing countries. He stated that rate increases will have little impact on inflation and recommended the use of price controls and windfall taxes.
Last month, the Bank of England was forced to return temporarily to quantitative easing by buying long-term government bonds. Yields on 10- and 30-year gilts had begun to rise in the high-interest-rate environment, bringing financial institutions closer to a so-called “Lehman moment.”
While stocks took a beating during the third quarter amid the high-rate environment, Bitcoin remained remarkably stable. In fact, the trading volume of Bitcoin it increased in the UK when the British pound crashed against the dollar last month.
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