Fed Chairman Jerome Powell in a bank symposium in Sweden emphasized the need for the central bank to be free of political influence in which the monetary decision to stabilize prices could politically draw unpopular views.
“Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy,” Powell said.
“The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors,” he noted.
Still, the Fed’s chair did not give any hint in his speech for the direction of where the U.S. interest rate is going. The U.S. central bank raised interest rates seven times in 2022 for a total of 4.25 basis points, taking the fed funds rate to 4.25%-4.5%.
However, the market anticipated that the Fed would not stop there as inflation remains higher than the target rate by the central bank. A 50-75 basis points are expected to be added this year before the Fed starts pivoting.
Current inflation indicates that it is possible for the Fed to reduce some of the rates to a landing around 4.5-4.75% by the end of this year.
