Federal Reserve Chairman Jerome Powell, with a seemingly clear path to a second term heading the central bank, declared Tuesday that the U.S. economy is both healthy enough and in need of a tighter monetary policy. Before hearing the U.S. Senate Committee on Banking, Housing and Urban Affairs, Powell said he expects a series of interest rate hikes this year, along with other reductions in the extraordinary help the Fed has been providing during the pandemic era.
He made the remarks during a 2½-hour session that included both praise for the Fed’s handling of the economy and criticism over perceived ethical lapses from central bank officials. Some Republican senators also expressed worries over whether the Fed was veering too far from its stated objectives of price stability, full employment, and banking oversight.
Many of the questions from both sides of the aisle centered on inflation, which is running at a close to a 40-year high. After declaring the surge “transitory” for much of 2021, the Fed has pivoted on inflation and is expected to raise rates three or four times this year in quarter-percentage-point increments.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.