Powell: ’50 basis points is on the table for the May meeting'

Federal Reserve Chairman Jerome Powell discusses the possibility of raising interest rates by 50 basis points at the Fed’s meeting in May.

Video Transcript

JEROME POWELL: So in terms of the US economy, we are a bit more remote from the immediate effects of the war compared to Europe, for example. But we will be feeling them over time, and they will come in the form of upward pressure on inflation, further upward pressure, and a bit of downward pressure on output. But the US economy is very strong, performing very well.

By most forecasts, we'll have another strong growth year this year. The labor market is extraordinarily tight, extremely tight, historically so. And to the point where, really, there's an imbalance between supply and demand for workers. And of course, the big issue that we're very focused on is inflation and getting inflation back down to our 2% goal.

You asked about a soft landing. Basically, that's our goal. Our goal is to get demand-- use our tools to get demand and supply back in sync so that inflation moves down, and do so without a slowdown that amounts to a recession. That's our goal. And I don't think you'll hear anyone at the Fed say that that's going to be straightforward or easy. It's going to be very challenging.

We're going to do our very best to accomplish that. And it's absolutely essential to restore price stability. Without price stability, really, the economies don't work without price stability. We need that to have a strong labor market for an extended period of time. We need it for financial stability. So we must do that using our tools to get 2% inflation back. And I think if you look at-- for example, if you at the last tightening cycle, which was a two-year string of 25 basis point hikes from 2004 to 2006, inflation was a little over 3%.

So inflation is much higher now, and our policy rate is still more accommodative than it was then. So it is appropriate, in my view, to be moving a little more quickly. And I also think there's something in the idea of front-end loading whatever accommodation one thinks is appropriate. So that does point-- that points in the direction of 50 basis points being on the table. Certainly we make these decisions at the meeting, and we'll make them meeting by meeting. But I would say that 50 basis points will be on the table for the May meeting.